Karson's manager compensation is an annual salary and qualifying bonus award. Managers qualify for the bonus award when their division ROA equals or exceeds Cecil Inc. ROA. The bonus is calculated as Cecil Inc. Residual Income divided by the number of qualifying managers who then share equally in the bonus pool. Residual Income is defined as Operating Income minus an interest charge of 8% of Average Total Assets.

a. For 2021, calculate each division’s ROA and identify which divisions qualify for the bonus pool (report percentages rounded two decimals).

b. Calculate the 2021 bonus pool amount for total Cecil Inc. and the bonus amount per manager (round amounts to the nearest whole dollar).

c. Based on your analysis, identify “Yes” or “No” if the bonus compensation plan helps Cecil Inc. be goal congruent: ___________________________

d. Discuss the reasons for your answer in part c.
 

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Revenues: 2021 2020 Naperville Metropolitan 22,500,000 15,300,000 9,500,000 19,600,000 12,500,000 Urbana 8,700,000 Operating Income: Naperville Metropolitan 1,900,000 1,800,000 1,100,000 900,000 Urbana 1,100,000 1,050,000 Average Total Assets: Naperville Metropolitan 10,000,000 9,500,000 6,500,000 8,000,000 Urbana 4,500,000 4,300,000 Number of Managers: Naperville Metropolitan Urbana 15 5 9 10 12 10 Revenues: 2021 2020 Naperville Metropolitan 22,500,000 15,300,000 9,500,000 19,600,000 12,500,000 Urbana 8,700,000 Operating Income: Naperville Metropolitan 1,900,000 1,800,000 1,100,000 900,000 Urbana 1,100,000 1,050,000 Average Total Assets: Naperville Metropolitan 10,000,000 9,500,000 6,500,000 8,000,000 Urbana 4,500,000 4,300,000 Number of Managers: Naperville Metropolitan Urbana 15 5 9 10 12 10

Answer rating: 100% (QA)

To compute the requirements using excel Formula c No d The goals can only be achieved when divisiona... View the full answer