The sales manager is deciding between two possible compensation structures for sales staff. Under one plan, salespeople would receive a base compensation of $80,000 per year plus a 1% commission on all sales to their customers. Under the other plan, the base compensation would drop to $40,000 per year, but the commission rate would increase to 5%. What are the advantages and disadvantages, to the company of both plans? As the accounting manager, would you have a preference? Why or why not? (answer in text form please (without image), Note: .Every entry should have narration please)
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The sales manager is deciding between two possible compensation structures for sales staff. Under one plan, salespeople would receive a base compensation of $80,000 per year plus a 1% commission on all sales to their customers. Under the other plan, the base compensation would drop to $40,000 per year, but the commission rate would increase to 5%. What are the advantages and disadvantages, to the company of both plans? As the
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- 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.Anita Brown is the manager of a wholesale food company. Her compensation, in part, is incentive-based. In other words, the higher the company income, the higher her incentive compensation. Each year, in an effort to influence her bonus, Anita makes several recommendations, concerning adjusting entries, to the company controller. One of her favorites is to ask the controller to reduce the estimate of doubtful accounts.1. How does lowering the estimate of doubtful accounts affect the income statement and balance sheet?2. Is there an ethical consideration in this case? If so, what is it?3. Should Anita be permitted to weigh in on adjusting entries under these circumstances? Why or why not?List the types of costs incurred when employees are laid off. What costs are difficult to estimate in monetary terms? Suppose that a firm is facing a downturn in business, each employee has skills valued at $40,000 per year, and it costs $100,000 to lay off an employee. If business is expected to improve in one year, are layoffs financially justified? What is the “payback” period for the layoff decision?
- Internal production supervisors of a company’s product line would be MOST likely to ask which of the following questions? Select answer from the options below 1.How much profit can the company expect to earn this year? 2.What can the company afford to pay its employees this year? 3.Which product line is the least profitable and should be eliminated? 4.How much should the company charge for its products to maximize its profit?RAJIV: I heard the HR manager say that they offer two supplemental plans, but I only wrote down the profit-sharing plan. Under this type of plan, your account does not depend on the company's performance. This is because when profits are low, the company makes larger less do not set depends _smaller contributions to the plan, and when profits are high, it pays more. However, employers maximum amounts to be paid as contributions. What is the other plan? ERISA SIMONE: The other plan she mentioned is the traditional 401(k) plan the Pension Protection Act RAJIV: Because our employer is a big Fortune 500 company, our plan is voluntary. It takes everyone's in company stock. set RAJIV: Agreed. Thanks for helping me complete my notes! benefits contributions minimum and and heavily invests i SIMONE: Well, I think I have my notes complete. I may need to clarify a few things that will apply just to me, vesting, profit-sharing percentages, and retirement age.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
- Your company plans to hire an employee at a yearly salaryof $70,000. Someone in your company says the actual costwill be lower because of payroll deductions. Someone elsesays it will be higher. Who is right? What is likely to bethe total cost to the company? Explain.Recently, the owner of KFC Franchise decided to change how she compensated her top manager. Last year, the manager received a fixed salary of GHC50,000 and KFC made GHC110,000 in profits (excluding the manager’s compensation). She feared that her store’s performance was connected to the top manager shirking on the job and expected that changes to her top manager’s compensation structure would improve sales. Therefore, this year she decided to offer him a fixed salary of $40,000 plus 5 percent of the store’s profit. Since the change, the store is performing much better, and she forecasts profits this year to be $300,000 (again, excluding the manager’s compensation). Assuming the change of compensation is the reason fothe increased profits, and the forecast is accurate, how much more money will the owner make (net of payment to her top manager) because of this change? Does the manager make more money under the new payment scheme?5. A good salesperson can sell $4,000,000 worth of goods, while a poor one can sell only $3,000,000 worth of goods. Job applicants know if they are good or bad, but the fim does not. A fim will offer job applicants a choice between a fixed salary or 25% commission. Assuming risk-neutral salespersons and no opportunistic behavior, what level must the fixed salary be so that the fim can distinguish a prospective good salesperson from a poor one, and thereby avoid hiring a poor one?
- Recently, the owner of KFC Franchise decided to change how she compensated her top manager. Last year, the manager received a fixed salary of GHC50,000 and KFC made GHC110,000 in profits (excluding the manager’s compensation). She feared that her store’s performance was connected to the top manager shirking on the job and expected that changes to her top manager’s compensation structure would improve sales. Therefore, this year she decided to offer him a fixed salary of $40,000 plus 5 percent of the store’s profit. Since the change, the store is performing much better, and she forecasts profits this year to be $300,000 (again, excluding the manager’s compensation). Assuming the change of compensation is the reason for owner make (net of payment to her top manager) because of this change? Does the manager make more money under the new payment scheme?You are the new managerial accountant for a company that awards its managers with a year-end bonus based on exceeding the target operating profit presented in the yearly budget proposal. The controller tells you that she believes the company will likely have operating profit of $120 million for the year, but asks you to prepare a proposal with projected operating profit of $100 million. She notes that "after all, it is only an estimate, and it would be a shame if the managers missed their bonus again this year after all their hard work." You realize that the only way to project operating profit of $100 million is to make unrealistically low sales estimates and unrealistically high cost estimates.Using the IMA's Statement of Ethical Professional Practice, what guidelines are violated and how should you handle this situation? Create a 100-word response.The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, "Given a choice, I will always prefer a $50,000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50,000 on a supposedly better accounting system?" Question: How should the controller respond?