The Act of Encouraging Non-Value-Adding Actions on the Part of Management

question 87

Multiple Choice

The act of encouraging non-value-adding actions on the part of management in order to improve indicated performance is referred to as:

• A) Goal congruency.
• B) Gaming the performance indicator.
• C) The use of fixed-performance contract.
• D) Linear optimization analysis.
• E) The use of a relative-performance contract.

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Definitions:

Fixed Cost

Costs that do not change with the volume of production or level of activity within a certain range.

Economic Order Quantity

A formula used to determine the optimal order size that minimizes the total holding costs and ordering costs in inventory management.

Variable Cost

Costs that vary directly with the level of production or volume of output.

Carrying Cost

The total cost of holding inventory, including storage, handling, depreciation, and opportunity costs.