Question
Asked Dec 17, 2019
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Why might managers seeking a monthly bonus based on attaining a target operating income prefer the sales method of accounting for byproducts rather than the production method?

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Expert Answer

Step 1

Production method:

 

Production method is a method of accounting for byproducts. As per production method, by products are recorded in the financial records as soon as production takes place.

 

Sales Method:

 

Sales method is a method of accounting for byproducts. As per sales method, by products are recorded in the financial records when sale of byproducts takes place.

Step 2

Identify the reason behind the managers for seeking a monthly bonus based on attaining a target operating income prefer sales method of accounting rather than production method.

 

  • Sales method allows the manager to alter the timing of the sale of byproducts and hence manipulate the operating income. In circumstances where the manager is unable to achiev...

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Business

Accounting

Cost Accounting

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