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Calculating the Costs of Increasing the Total Compensation
Budget at Butcher Enterprises
Butcher Enterprises has experienced substantial employee
turnover among its office workers. During exit interviews,
more than 80 percent stated that low pay was the top
reason for resigning. The company conducted a survey of
local companies’ pay practices to confirm whether this
concern is valid. Indeed, Butcher Enterprises’ average
hourly pay rate for total compensation falls well below the
market. The compensation survey showed an average
hourly rate of $23 for total compensation. Of this amount,
wages are $16 per hour and benefits are $7 per hour. In
comparison, Butcher Enterprises spends an average hourly
rate of $19 for total compensation. Of this amount, 70
percent is allocated for wages.
1.1. On an average hourly basis, how much does Butcher
Enterprises spend on wages and benefits,
respectively, in dollars?
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- Butcher Enterprises has experienced substantial employee turnover among its office workers. During exit interviews, more than 80 percent stated that low pay was the top reason for resigning. The company conducted a survey of local companies' pay practices to confirm whether this concern is valid. Indeed, Butcher Enterprises' average hourly pay rate for total compensation falls well below the market. The compensation survey showed an average hourly rate of $28.00 for total compensation. Of this amount, wages are $26.00 per hour and benefits are $2 per hour. In comparison, Butcher Enterprises spends an average hourly rate of $22 for total compensation. Of this amount, 70 percent is allocated for wages. Butcher Enterprises spends $ 15.40 on wages and $ 6.60 on benefits, respectively, on an average hourly basis. Round your response to the nearest hundreths place. If we assume that each worker provides 2,080 hours of service each year, then the company will spend son wages and $ on benefits…A payday loan company has decided to open several new locations in a city and hires consultants to decide where to open these locations. The consultants are paid per store that is opened, and at the end of the quarter, the company notices a many of the new stores' sales volume fail to meet expectations. To incentivize the consultants to instead focus on opening profitable stores, the company decided to alter the compensation to a percentage of the profit earned per new store. This puts the consultants_ and the payday loan company should expect to compensate for this change. to Group of answer choices 1. In a less risky position; pay the consultants more than they would in the per- store scheme 2. A more risky position; pay the consultants less than they would in the per- store scheme 3. In a less risky position; pay the consultants less than they would in the per- store scheme 4. A more risky position; pay the consultants more than they would in the per- store schemeMembers of the board of directors of Security Team have received the following operating income data for the year ended May 31, 2018: E (Click the icon to view the operating income data.) Members of the board are surprised that the industrial systems product line is not profitable. They commission a study to determine whether the company should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $84,000 and decrease fixed selling and administrative expenses by $10,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating income - X Requirements 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Team's total operating…
- Anita Brown is the manager of a wholesale food company. Her compensation, in part, is incentive-based. In other words, the higher the company income, the higher her incentive compensation. Each year, in an effort to influence her bonus, Anita makes several recommendations, concerning adjusting entries, to the company controller. One of her favorites is to ask the controller to reduce the estimate of doubtful accounts.1. How does lowering the estimate of doubtful accounts affect the income statement and balance sheet?2. Is there an ethical consideration in this case? If so, what is it?3. Should Anita be permitted to weigh in on adjusting entries under these circumstances? Why or why not?Members of the board of directors of Safety Place have received the following operating income data for the year ended May 31, 2018: (Click the icon to view the operating income data.) Members of the board are surprised that the industrial systems product line is not profitable. They commission a study to determine whether the company should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $80,000 and decrease fixed selling and administrative expenses by $10,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Safety Place should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating incomeTonya Martin, CMA and controller or the Parts Division of Gunderson Inc., was meeting with Doug Adams, manager of the division. The topic of discussion was the assignment of overhead costs to jobs and their impact on the divisions pricing decisions. Their conversation was as follows: Tonya: Doug, as you know, about 25% of our business is based on government contracts, with the other 75% based on jobs from private sources won through bidding. During the last several years, our private business has declined. We have been losing more bids than usual. After some careful investigation, I have concluded that we are overpricing some jobs because of improper assignment of overhead costs. Some jobs are also being underpriced. Unfortunately, the jobs being overpriced are coming from our higher-volume, labor-intensive products, so we are losing business. Dong: I think I understand. Jobs associated with our high-volume products are being assigned more overhead than they should be receiving. Then when we add our standard 40% markup, we end up with a higher price than our competitors, who assign costs more accurately. Tonya: Exactly. We have two producing departments, one labor-intensive and the other machine-intensive. The labor-intensive department generates much less overhead than the machine-intensive department. Furthermore, virtually all of our high-volume jobs are labor-intensive. We have been using a plantwide rate based on direct labor hours to assign overhead to all jobs. As a result, the high-volume, labor-intensive jobs receive a greater share of the machine-intensive departments overhead than they deserve. This problem can be greatly alleviated by switching to departmental overhead rates. For example, an average high-volume job would be assigned 100,000 of overhead using a plantwide rate and only 70,000 using departmental rates. The change would lower our bidding price on high-volume jobs by an average of 42,000 per job. By increasing the accuracy of our product costing, we can make better pricing decisions and win back much of our private-sector business. Doug: Sounds good. When can you implement the change in overhead rates? Tonya: It wont take long. I can have the new system working within four to six weekscertainly by the start of the new fiscal year. Doug: Hold it. I just thought of a possible complication. As I recall, most of our government contract work is done in the labor-intensive department. This new overhead assignment scheme will push down the cost on the government jobs, and we will lose revenues. They pay us full cost plus our standard markup. This business is not threatened by our current costing procedures, but we cant switch our rates for only the private business. Government auditors would question the lack of consistency in our costing procedures. Tonya: You do have a point. I thought of this issue also. According to my estimates, we will gain more revenues from the private sector than we will lose from our government contracts. Besides, the costs of our government jobs are distorted. In effect, we are overcharging the government. Doug: They dont know that and never would unless we switch our overhead assignment procedures. I think I have the solution. Officially, lets keep our plantwide overhead rate. All of the official records will reflect this overhead costing approach for both our private and government business. Unofficially. I want you to develop a separate set of books that can be used to generate the information we need to prepare competitive bids for our private-sector business. Required: 1. Do you believe that the solution proposed by Doug is ethical? Explain. 2. Suppose that Tonya decides that Dougs solution is not right and objects strongly. Further suppose that, despite Tonyas objections, Doug insists strongly on implementing the action. What should Tonya do?
- A&R Quality Advisors is a small consulting firm offering quality audits and advising services to small and mid-sized manufacturing firms. Quality audits entail reviewing, checking, and documenting quality practices within a firm. Quality advising entails making recommendations for new or revised quality practices. Other firms in the area offer one or both of these services, although the competition for quality audit jobs is stronger than for quality advising. In addition to senior executives, A&R employees are either staff or managers. Staff employees are usually younger with less experience. Managers, who oversee the staff on jobs, are more experienced. The average hourly wage is $60 for staff and $150 for managers. (Both staff and managers are paid an annual salary; these hourly costs are based on 2,000 average annual hours worked.) Staff are expected to spend at least 90 percent of their time on billable work. Because of administrative work associated with supervising the staff and…Arcadia Plastics follows the philosophy of transferring employees from job to job within the company. Management believes the job rotation deters employees from feeling that they are stagnating in their jobs and promotes a better understanding of the company. A computer services employee typically works for six months as a data librarian, one year as systems developer, six months as a database administrator, and one year in systems maintenance. At that point, he or she is assigned to a permanent position. Required: Discuss the importance of separation of duties within the information systems department. How can Arcadia Plastics have both rotation and well-separated duties?An accountant has been monitoring the overall indirect service costs incurred at their company based on the number of labour hours worked. They accept that the costs follow a uniform, regular pattern so decide to use the High-Low method to calculate the Variable Costs and then the fixed costs. The have found the during the month when the lowest hours were worked ( 2083 hours) that the service costs in that low activity month was $14705. In the month when the highest hours were worked ( 4803 hours) the service costs were $18998. Calculate the Variable Cost using the high-low method. Note: Do not input the $ sign, just the decimal number to two decimal places
- David Kelley is considering the implementation of an incentive wage plan to increase productivity in his small manufacturing plant. The plant is nonunion, and employees have been compensated with only an hourly-rate plan. Julie Phelps, Vice President–Manufacturing, is concerned that the move to an incentive compensation plan will cause direct laborers to speed up production and, thus, compromise quality. Step 1 - With that information in mind, discuss the following questions. Your posting should be at least 500 words* in length. This means you should elaborate on your answers, not simply answer each question with one or two words. You should also reference information already learned in our studies. How might Kelley accomplish his goals while alleviating Phelps’ concerns? Does the compensation have to be all hourly rate or all incentives? Can incentive compensation also apply to service businesses?Recently, the owner of KFC Franchise decided to change how she compensated her top manager. Last year, the manager received a fixed salary of GHC50,000 and KFC made GHC110,000 in profits (excluding the manager’s compensation). She feared that her store’s performance was connected to the top manager shirking on the job and expected that changes to her top manager’s compensation structure would improve sales. Therefore, this year she decided to offer him a fixed salary of $40,000 plus 5 percent of the store’s profit. Since the change, the store is performing much better, and she forecasts profits this year to be $300,000 (again, excluding the manager’s compensation). Assuming the change of compensation is the reason for owner make (net of payment to her top manager) because of this change? Does the manager make more money under the new payment scheme?Recently, the owner of KFC Franchise decided to change how she compensated her top manager. Last year, the manager received a fixed salary of GHC50,000 and KFC made GHC110,000 in profits (excluding the manager’s compensation). She feared that her store’s performance was connected to the top manager shirking on the job and expected that changes to her top manager’s compensation structure would improve sales. Therefore, this year she decided to offer him a fixed salary of $40,000 plus 5 percent of the store’s profit. Since the change, the store is performing much better, and she forecasts profits this year to be $300,000 (again, excluding the manager’s compensation). Assuming the change of compensation is the reason fothe increased profits, and the forecast is accurate, how much more money will the owner make (net of payment to her top manager) because of this change? Does the manager make more money under the new payment scheme?
