Evaluating and rewarding managers based on absorption costing income can lead to overproduction.

Absorption Costing Income

The profit figure calculated under absorption costing, including all costs of production – both fixed and variable – in product costs, affecting reported income.

Overproduction

The production of goods in quantities exceeding the demand, often leading to excess inventory and potential financial losses.

Evaluating

The process of assessing or examining something with the possible intent of instituting change based on that assessment.