Heartwood Furniture Corporation has a line of sofas marketed under the name NightTime Sleepers. Heartwood management is
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1. Amy is risk-neutral and prefers to receive the maximum reward for her hard work. Do you recommend compensation based on flat salary, an ROI-based bonus, or a combination of both? Why?
2. If Amy does not make investing decisions for NightTime, is ROI still a good performance measure? If so, then explain why. If not, suggest an alternative.
3. Heartwood Furniture plans to evaluate Amy by comparing NightTime's ROI to the ROI of Stiles Furniture, which operates in a business environment similar to that of NightTime. Both companies have the same capabilities, but Stiles uses a significantly different manufacturing strategy than NightTime.
a. Would evaluating Amy with this benchmark be fair?
b. Would using residual income instead of ROI offer any advantages for Heartwood?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For 
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
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