At ABC Co., 10% of each salesperson's yearly bonus is based on whether or not the entire company reaches its annual sales goals. ABC's compensation structure is based on the fundamental idea that ______. A) compensation policies must be legal B) incentives will be more effective if it encourages people to act in ways that benefit both society and the person C) people will work to accomplish a goal if they have a real stake in the reaching the goal D) incentive structures should be as simple as possible E) People are more likely to adhere to a policy if they have had some input into the development of the policy
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At ABC Co., 10% of each salesperson's yearly bonus is based on whether or not the entire company reaches its annual sales goals. ABC's compensation structure is based on the fundamental idea that ______.
A) compensation policies must be legal
B) incentives will be more effective if it encourages people to act in ways that benefit both society and the person
C) people will work to accomplish a goal if they have a real stake in the reaching the goal
D) incentive structures should be as simple as possible
E) People are more likely to adhere to a policy if they have had some input into the development of the policy
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- Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 15% of the division’s net income. Division income in 2024 before the bonus and income tax was $250,000. The tax rate is 30%. Calculate the amount of the bonus. Prepare the adjusting entry to record the bonus compensation. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 10% of the division’s income before tax, but after the bonus itself. Calculate the amount of the bonus.Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the division’s net income. Division income in 2016 before the bonus and income tax was $150,000. The tax rate is 30%. Required: 1. Express the bonus formula as one or more algebraic equation(s). * 2. Using these formulas calculate the amount of the bonus. 3. Prepare the adjusting entry to record the bonus compensation. 4. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 10% of the…Sometimes compensation packages include bonuses designed to provide performance incentives to employees.The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonusitself. This occurs any time the bonus is a percentage of income because expenses are components of income,and the bonus is an expense.Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equalto 10% of the division’s net income. Division income in 2018 before the bonus and income tax was $150,000. Thetax rate is 30%.Required:1. Express the bonus formula as one or more algebraic equation(s).342. Using these formulas, calculate the amount of the bonus.3. Prepare the adjusting entry to record the bonus compensation.4. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 10% of the…
- 9. James Jessmore is a manager at a local bank. James's management style is best described as entrepreneurial-he is risk neutral. Wynetta George is a customer service representative who reports to James. Wynetta is risk averse. In designing a compensation package for James and Wynetta, which type of compensation arrangement should be emphasized more? James Jessmore a. Performance-based b. Performance-based C. Straight salary d. Straight salary Wynetta George Performance-based Straight salary Performance-based Straight salaryMr. Smart is working by employing skilled workers. He is considering the introduction of some incentive scheme - either Halsey Scheme or Rowan Scheme of wage payment for increasing the Employee productivity to cope with the increased demand for the product by 10%. He feels that if the proposed incentive scheme could bring about an average 5% increase over the present earnings of the workers, it could act as sufficient incentive for them to produce more and he has accordingly given this assurance to the workers. As a result of the assurance, the increase in productivity has been observed as revealed by the following figures for the current month: RO 35 are the Hourly rate of wages (guaranteed), Average time for producing 1 piece by a worker at the previous performance is 20 seconds (This may be taken as time allowed), No. of working hours per day for each worker is 480 minutes and the worker worked for 360 minutes and his actual production during the day was 1,550 units. Calculate bonus…Several managers in your company are experiencingpersonal financial problems and have asked that yourcompany switch from LIFO to FIFO so that they canreceive bigger bonuses, which are tied to the company’snet income. How would you respond to this request if youwere the company’s chief financial officer (CFO)? Wouldsuch a switch help the managers? Who could it hurt?
- The purpose of human resource management is to ensure employees are selected, used and developed in the best and most effective ways possible so their organization can achieve the highest levels of productivity and quality of work. * O True O False Retained profits and personal savings of the business are both examples internal sources of finance. * O True O FalşeSalespeople who earn more than a particular amount get incentives. Who gets a bonus and how much? Can Excel do this?Part BABC Ltd has incorporated a bonus plan that rewards the board of directors (executive members) by providing a bonus of 3 per cent of reported profits. This is an Accounting-based incentive that has the advantage whichthe accounting results may be based on subunit or divisional performance."A well-informed labour market will motivate management to work to maximise the value of its firm. Underperformance might lead to dismissal and, if the labour market is efficient in disseminating data, a 'failed'manager might have difficulty attracting a position with comparable pay elsewhere." (Deegan, 2020)Requirement:1) Using Positive Accounting Theory (PAT), discuss the bonus theme in general and why the bonus plan(Accounting-based) was put in place in ABC Ltd?2) Explain whether the board of directors could be motivated to try to inflate reported profits.3) Use the opportunistic perspective of PAT to explain the potential for managers to manipulate corporate disclosure.
- P4.6 (LO 1, 2, 5), s Excel Maddie, the owner of a used car dealership, is working on compensation plans for her employees. She is trying to evaluate how a commission-based versus salary-based workforce would affect her bottom line. In considering her options, she finds basic financial information of two companies with similar year-end performance but different compensation plans-perfect examples to help her with her evaluation! Company X uses a commission-based approach, where its sales staff operates exclusively on commission. Com- pany Y, on the other hand, pays its sales staff a flat salary with no commission. Here are the basics for each company. Company X Company Y Current volume 10,000 units 10,000 units Selling price $ 50 $ 50 Variable cost per unit $ 20 $ 10 Fixed costs $100,000 $200,000 Required a. Present a contribution margin income statement for each company at its current volume of sales, and calculate the degree of operating leverage (DOL) for each. b. Utilizing the DOL…You are a member of the board of directors of a small manufacturing firm. The firm is about to hire a new CEO and is discussing the compensation package that will be offered. A salary of $350,000 has already been settled, but the board is uncertain how to structure the bonus. The proposal that has gained the most support is to pay a bonus based on some percentage of operating income. Some of the board members believe that the bonus should be based on absorption costing operating income while others think that variable costing operating income should be used. Which option do you support? State clearly why this option is best.Which one of the following represents the best effort to reduce the agency problem? Select one: Increasing the salary of the company CEO every time the company opens a new store Giving senior managers bonuses consisting of shares of company whenever the company improves its production efficiency Providing company cars to all managers employed by the firm for more than one year Paying senior managers a cash bonus each year based on the number of people employed by the company