The Squeaky Division of Household Products Corporation showed a net loss of £5,000,000 last year, but Squeaky's manager received a bonus for outstanding performance. Why would Household Products' management control system appropriately allow for this apparent inconsistency?

Question

Quizplus · Accepted Answer

The fact that the division showed a net loss does not necessarily mean that the manager's performance was poor. Economic factors outside the manager's control, such as shifts in the market, may have affected the division's performance. Therefore, the bonus could be a recognition of the manager's ability to navigate tough economic conditions despite the loss.

The Squeaky Division of Household Products Corporation Showed a Net