Wholesale Sales 2017 $1,108,123 Retail Sales Online Sales 2017 $1,557,479 75 2016 2017 2016 2016 Net income Customer satisfaction $730,000 87 $811,900 93 $1,218,000 78.3 $1,062,540 65.7 72.9
Acme Company recently introduced a new bonus plan for its corporate executives. The company believes that current profitability and customer satisfaction levels are equally important to the company’s long-term success. As a result, the new plan awards a bonus equal to 0.5% of salary for each 1% increase in business unit net income or 1% increase in the business unit’s customer satisfaction index. For example, increasing net income from $1 million to $1.1 million (or 10% from its initial value) leads to a bonus of 5% of salary, while increasing the business unit’s customer satisfaction index from 50 to 60 (or 20% from its initial value) leads to a bonus of 10% of salary. There is no bonus penalty when net income or customer satisfaction declines. In 2016 and 2017, Acme’s three business units reported the following performance results:
Q. What factors might explain the differences between improvement rates for net income and those for customer satisfaction in the three units? Are increases in customer satisfaction likely to result in increased net income right away?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
