Question

In: Accounting

Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for...

Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 5 percent of salary. Kevin’s base salary is $290,000 and Michelle’s is $350,000.

The target profit for this year is $6 million. Kevin has read about a new manufacturing technique that would increase annual profit by 20 percent. He is unsure whether to employ the new technique this year, wait, or not employ it at all. Using the new technique will not affect the target.

Required:

a. Suppose that profit without using the technique this year will be $6 million. By how much will Kevin’s and Michelle’s bonus change if Kevin decides to employ the new technique? (Enter your answers in dollars, not in millions.)

Bonus Change
Kevin's ??
Michelle's ??

b. Suppose that profit without using the technique this year will be $8.5 million. By how much will Kevin’s and Michelle’s bonus change if Kevin decides to employ the new technique? (Round your intermediate percentage answers to nearest whole percent. Enter your answers in dollars, not in millions.)

Bonus Change
Kevin's ??
Michelle's ??

Solutions

Expert Solution

Base Salary of Kevin=$290,000

Base salary of Michelle=$350,000

Target Profit=$6 million

By using the new technique, profit increased by 20%.

Bonus=2% of base salary

a.Profit without using this technique expected to be $6 million

Bonus without using the technique=Nil

Bonus Change

Kevin's

$                   5,800

(0.02*290000)

Michelle's

$                   7,000

(0.02*350000)

b. Profit without using this technique expected to be $8.5million

Increase in profit from target=(8.5/6)-1=0.41667=41.67%

Bonus without using the technique=4%

Kevin’s Bonus=0.04*290000=$11600

Michelle’s Bonus=0.04*350000=$14,000

Annual Profit by using the technique=1.2*8.5=$10.2 million

Increase in profit from target=(10.2/6)-1=0.7=70%

Bonus by using the technique:

Kevin’s Bonus=0.07*290000= $ 20,300

Michelle’s Bonus=0.07*350000= $ 24,500

Bonus Change

Kevin's

$     8,700

(20300-11600)

Michelle's

$     10,500

(24500-14000)

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 5 percent of salary. Kevin’s base salary is $270,000 and Michelle’s is $330,000. The target profit for this year...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 5 percent of salary. Kevin’s base salary is $270,000 and Michelle’s is $330,000. The target profit for this year...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 5 percent of salary. Kevin’s base salary is $370,000 and Michelle’s is $430,000. The target profit for this year...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 6 percent of salary. Kevin’s base salary is $280,000 and Michelle’s is $340,000. The target profit for this year...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the pro- duction manager, responsible...
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the pro- duction manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 5 percent of salary. Kevin’s base salary is $180,000 and Michelle’s is $240,000. The target profit for this...
The manager of the manufacturing unit of a company is responsible for the costs of the...
The manager of the manufacturing unit of a company is responsible for the costs of the manufacturing unit. The president is in the process of deciding whether to evaluate the manager of the manufacturing unit by the average cost per unit or the variable cost per unit. Quality and timely delivery would be used in conjunction with the cost measure to reward the manager. Required: a. What problems are associated with using the average cost per unit as a performance...
A production manager knows that 8.5% of components produced by a particular manufacturing process have some...
A production manager knows that 8.5% of components produced by a particular manufacturing process have some defect. Eight of these components, whose characteristics can be assumed to be independent of each other were examined. a. Write the distribution function in terms of ? and x. b. What is the probability that none of these components has a defect? c. What is the probability that two of the components have a defect? d. What is the probability that between two and...
Forest Components makes aircraft parts. The following transactions occurred in July: Purchased $16,940 of materials on...
Forest Components makes aircraft parts. The following transactions occurred in July: Purchased $16,940 of materials on account. Issued $16,820 in direct materials to the production department. Issued $1,230 of supplies from the materials inventory. Paid for the materials purchased in transaction (1) using cash. Returned $2,190 of the materials issued to production in (2) to the materials inventory. Direct labor employees earned $32,200, which was paid in cash. Paid $17,200 for miscellaneous items for the manufacturing plant. Accounts Payable was...
Forest Components makes aircraft parts. The following transactions occurred in July. Purchased $16,990 of materials on...
Forest Components makes aircraft parts. The following transactions occurred in July. Purchased $16,990 of materials on account. Issued $16,720 in direct materials to the production department. Issued $1,320 of supplies from the materials inventory. Paid for the materials purchased in transaction (1) using cash. Returned $2,010 of the materials issued to production in (2) to the materials inventory. Direct labor employees earned $31,500, which was paid in cash. Purchased miscellaneous items for the manufacturing plant for $17,350 on account. Recognized...
Forest Components makes aircraft parts. The following transactions occurred in July. Purchased $16,890 of materials on...
Forest Components makes aircraft parts. The following transactions occurred in July. Purchased $16,890 of materials on account. Issued $16,770 in direct materials to the production department. Issued $1,300 of supplies from the materials inventory. Paid for the materials purchased in transaction (1) using cash. Returned $2,080 of the materials issued to production in (2) to the materials inventory. Direct labor employees earned $32,600, which was paid in cash. Purchased miscellaneous items for the manufacturing plant for $17,370 on account. Recognized...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT