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Household Products Corporation (a U.S.-based company) has a foreign subsidiary. The foreign subsidiary imports inventory from U.S. The foreign currency depreciated last year and the
Household Products Corporation (a U.S.-based company) has a foreign subsidiary. The foreign subsidiary imports inventory from U.S. The foreign currency depreciated last year and the subsidiary showed a net loss of 5,000,000, but the subsidiary's manager received a bonus for outstanding performance. Why would Household Products' management control system appropriately allow for this apparent inconsistency? The manager mitigated economic exposure through switching to local suppliers to purchase inventory. Household Products' management control system is effective. The bonus represents a payoff to subsidiary's manager to keep her quiet about the loss. The loss was due to controllable factors
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