Taylor Grey is the sales manager of an electronics manufacturing company. His annual bonus is based on profits earned by the company. On December 30, Taylor is inquiring about the status of a very large order that he would like to include in the year-end profit figures. Unfortunately, a production machine has broken down. Taylor has been advised the order will not be completed and shipped by the end of the year. The profit figures including and excluding the order appear below.
Profit Including the Order Profit Excluding the Order
$2,300,000 $1,500,000
Taylor’s bonus is 3% of profits.

Required
A. Using the financial information provided, calculate Taylor’s bonus under both scenarios.
B. Why do companies use accounting information to evaluate managerial performance?
C. Is there an economic incentive for Taylor to misrepresent the annual sales?