One division of a company is composed of three people working in a team with total...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
One division of a company is composed of three people working in a team with total productivity of $400. The accounting system appropriately measures the division profits as $400. Let's call the three team members Diana, Mary, and Florence. Suppose we've chosen these individuals because among all combinations of individuals they produce the most team productivity. Now replace Diana by the next best alternative person from outside the existing team, and let's say that total output drops to $350. Production with Diana is $400. Production with the next best alternative is $350. Having Diana is better than the next best alternative by $50. Diana should be able to use this as bargaining power to extract the lion's share of this incremental productivity. Diana could bargain that the team should be willing to pay at least the value of $49.99 to Diana and the other two team members are still better off by the net $0.01 remaining of added productivity. By giving Diana the entire $50, at worst the remaining team members should be indifferent to whether Diana or the next best alternative is on the team. Suppose that something similar is true for Mary and Florence. When Mary is replaced by the next best alternative, productivity drops to $350. When Florence is replaced by the next best alternative, productivity drops to $350. As a result, they each have bargaining power over the team for the worth of about $50. Here's what I see at this point; out of $400 of productivity, each team member has bargaining power to extract $50 from the team. for a total of $150. This leaves $250 of productivity remaining that is accounted for by the team organization and not inherently able to be appropriated by any individual currently in the team. Required: 1. The way we have set the problem so far, there is no clear contact person for central administration to talk to. Let's say that Diana is designated the division manager, so central administration will contact Diana for questions. What factors work for and against central administration using the profits of $400 to compensat Diana? 2. The way we have set the problem so far, there is a core level of profitability of $250 that is not attributable to any individual. How should the $250 be distributed among team members? This is a product of your own reflection. There is not a correct answer. 3. Accounting tends to operate by collecting information about what has happened and not about next best alternatives. Do we ever collect information about next best alternatives? Is it important? This is a chapter on the use of accounting for monitoring purposes, so I suppose the context of my question is about the relevance of accounting when compensating a team. 4. My example isn't the only way the numbers could work out. It's possible that replacing each person in turn would cause productivity to drop by $200. This gives the collected team members bargaining power over a total of $600 when total productivity is only $400. What happens then? One division of a company is composed of three people working in a team with total productivity of $400. The accounting system appropriately measures the division profits as $400. Let's call the three team members Diana, Mary, and Florence. Suppose we've chosen these individuals because among all combinations of individuals they produce the most team productivity. Now replace Diana by the next best alternative person from outside the existing team, and let's say that total output drops to $350. Production with Diana is $400. Production with the next best alternative is $350. Having Diana is better than the next best alternative by $50. Diana should be able to use this as bargaining power to extract the lion's share of this incremental productivity. Diana could bargain that the team should be willing to pay at least the value of $49.99 to Diana and the other two team members are still better off by the net $0.01 remaining of added productivity. By giving Diana the entire $50, at worst the remaining team members should be indifferent to whether Diana or the next best alternative is on the team. Suppose that something similar is true for Mary and Florence. When Mary is replaced by the next best alternative, productivity drops to $350. When Florence is replaced by the next best alternative, productivity drops to $350. As a result, they each have bargaining power over the team for the worth of about $50. Here's what I see at this point; out of $400 of productivity, each team member has bargaining power to extract $50 from the team. for a total of $150. This leaves $250 of productivity remaining that is accounted for by the team organization and not inherently able to be appropriated by any individual currently in the team. Required: 1. The way we have set the problem so far, there is no clear contact person for central administration to talk to. Let's say that Diana is designated the division manager, so central administration will contact Diana for questions. What factors work for and against central administration using the profits of $400 to compensat Diana? 2. The way we have set the problem so far, there is a core level of profitability of $250 that is not attributable to any individual. How should the $250 be distributed among team members? This is a product of your own reflection. There is not a correct answer. 3. Accounting tends to operate by collecting information about what has happened and not about next best alternatives. Do we ever collect information about next best alternatives? Is it important? This is a chapter on the use of accounting for monitoring purposes, so I suppose the context of my question is about the relevance of accounting when compensating a team. 4. My example isn't the only way the numbers could work out. It's possible that replacing each person in turn would cause productivity to drop by $200. This gives the collected team members bargaining power over a total of $600 when total productivity is only $400. What happens then?
Expert Answer:
Answer rating: 100% (QA)
1 What factors work for and against central administration using the profits of 400 to compensate Diana ANSWER There are several factors at play here ... View the full answer
Related Book For
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
Posted Date:
Students also viewed these business communication questions
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Googles ease of use and superior search results have propelled the search engine to its num- ber one status, ousting the early dominance of competitors such as WebCrawler and Infos- eek. Even later...
-
Suppose that a countrys annual growth rates were 5, 3, 4, 1, 2, 2, 3, 4, 6, and 3 in yearly sequence over a 10-year period. What was the countrys trend rate of growth over this period? Which set of...
-
Alliance Corporation (an Australian company) invests 1,000,000 marks in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date, and generates net income of...
-
What do you think of the particular assignment given to Browning?
-
From the following accounts of Kurlz Salon, Inc., prepare the businesss statement of retained earnings for the year ended December 31, 2010: Retained Earnings Dividends Clo 95,000 Jan 1 188,000 Mar...
-
Using a flexible budget to accommodate market uncertainty According to its original plan, Darey Consulting Services Company would charge its customers for service at $125 per hour in 2011. The...
-
On January 1, Mitzu Company pays a lump-sum amount of $2,700,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an...
-
The master budget at Cherrylawn Corporation at the beginning of the year was based on sales of 275,000 units with revenues of $3,300,000. Total variable costs were budgeted at $1,925,000 and fixed...
-
The table below shows data for the production of avocados for an individual firm operating in a perfectly competitive market. Quantity of avocados Total Revenue Total Costs 0 0 10 10 60 30 20 120 40...
-
Solve La fofo (xsin(y) - y cos(x)) dxdy = | 2x
-
10. A nickel (m = 5.00 g) is placed on the edge of a rotating disc with a radius of 0.41 m. At a particular instant, the component of the force acting on the coin causing it to have an acceleration...
-
What would be a good business decision for the Apple make this decision by evaluating and looking at their the financial statements - income statement, balance sheet, statement of retained earnings,...
-
In a study prepared in 2000, the percentage of households using online banking was projected to be f(t)=1.90.72 (0 t4) where t is measured in years, with t = 0 corresponding to the beginning of 2000....
-
Slot A is to be machined on 2000 components using a milling machine as shown in Figure 2. To do this a milling fixture is to be designed. Study Figure 2 and do the following: State and discuss the...
-
Your company, a US multinational, has just transferred you as a manager of [you choose your position] to the following country [you choose the country]. You are in the industry of [you choose the...
-
Define the term utility software and give two examples.
-
Management is responsible for which of the following? a. Preparing financial statements in accordance with the appropriate auditing standards. b. Designing, implementing, and maintaining internal...
-
a. Analysis and evaluation: What concerns, if any, are raised by the evidence noted above? Assuming that the problems found in the sample are representative of problems in the population, determine...
-
Sinha Airways owns many of its aircraft. The useful lives and residual values may be influenced by external changes to economic conditions, demand, and new technology. Analytical procedures show that...
-
What is the IQR? What does the IQR represent? The population parameters below describe the full-time equivalent number of students (FTES) each year at Lake Tahoe Community College from 19761977...
-
How many standard deviations away from the mean is the median? The population FTES for 20052006 through 20102011 was given in an updated report. The data are reported here. The population parameters...
-
A class of 20 students has a mean grade of 80 on a test. Nineteen of the students has a mean grade between 79 and 82, inclusive. a. What is the lowest possible grade of the other student? b. What is...
Study smarter with the SolutionInn App