a mug company makes mugs They have capacity for 50 million but the recession cut production and sales in the current year to 15 million mugs . The income statement is Sales (15 million at $2) $30 Less cost of goods sold Variable cost 15million at $.50. (7.5) Fixed cost (20) Gross margin 2.5 Less selling and admin -4.0 Operating profit (1.5) Concerned with the loss they hired a new president with an employment contract that pays a fixed wage of $50,000 a year plus 15 percent of the firms operating profits . Operating profits are calculated using absorption costing . In 2017 the new president doubles the selling and admin budget to $8 moon which includes the presidents salary of $50,000 Production is increased to 45 million mugs and sales climb to 18 million mugs at $2 each. Variable costs per mug remain at $.50 and fixed costs at $20 million in 2017. A) Calculate the president's bonus for 2017 B) Evaluate the performance of the new president in 2017 Did he do as good a job as the numbers in part A suggest
a mug company makes mugs They have capacity for 50 million but the recession cut production and sales in the current year to 15 million mugs . The income statement is Sales (15 million at $2) $30 Less cost of goods sold Variable cost 15million at $.50. (7.5) Fixed cost (20) Gross margin 2.5 Less selling and admin -4.0 Operating profit (1.5) Concerned with the loss they hired a new president with an employment contract that pays a fixed wage of $50,000 a year plus 15 percent of the firms operating profits . Operating profits are calculated using absorption costing . In 2017 the new president doubles the selling and admin budget to $8 moon which includes the presidents salary of $50,000 Production is increased to 45 million mugs and sales climb to 18 million mugs at $2 each. Variable costs per mug remain at $.50 and fixed costs at $20 million in 2017. A) Calculate the president's bonus for 2017 B) Evaluate the performance of the new president in 2017 Did he do as good a job as the numbers in part A suggest
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)