COST MANAGEMENT: A STRATEGIC EMPHASIS E
COST MANAGEMENT: A STRATEGIC EMPHASIS E
8th Edition
ISBN: 9781260912449
Author: BLOCHER
Publisher: MCG
Question
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Chapter 19, Problem 25E

1.

To determine

Identify the current return on investment (ROI) being realized by your divison before considering new investment.

2.

To determine

Identify the current return on investment (ROI) being realized by your division after considering new investment.

3.

To determine

State whether, as a manager of this division given your incentive compensation plan would be motivated to make new investment.

4.

To determine

Suggest any offer recommends for improving the design of the incentive compensation plan under which you are working, and if you think that plan would result in increased alignment of your incentives with the goal of the company.

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The audited accounts of Lindsay Co. for year-end August 31, 2014 show a profit of $3,115,000 after charging the following: Depreciation 430,000 Rent 175,000 Legal fees 1,350,000 Audit fees 88,000 Donations 119,000 Bad debts 242,000 Foreign Travel 395,750 Interest payments 62,375 Other Information: Legal fees are as follows: Expenses in respect of recovery of debts, $585,000 Expenses related to the increase private share capital, $765,000 Lindsay Co. donated $65,500 to UTECH University and $53,500 to HELP, a private charity registered under the Charities Act. Bad debts are as follows: A loan of $76,130 to Derek Stan who failed to repayit. $63,017, owed by Simplicity Ltd. which was declared bankrupt. The balance is a percentage of receivables at year end which is deemed to be bad. Foreign travel expense included $268,210 for a vacation package for the marketing manager’s and his family plane tickets. The remaining amount was for a business trip to meet with potential suppliers.…
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