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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.Compute the bonus as a percent of salary earned by each business unit executive in 2017

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
Transcribed Image Text: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
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