ROI Bonus = Return on Investment for the year x 50% RI Bonus = Residual Income from
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Question:
- ROI Bonus = Return on Investment for the year x 50%
- RI Bonus = Residual Income from all investments throughout the year
- ROS Bonus = Return on Sales x 30%
Bonus formula = ROI Bonus x ROS Bonus x RI Bonus
Example: ROI Bonus x ROS Bonus x RI Bonus
(15% x 50%) x (40% x 30%) x $2,500,000
(7.5%) x (12%) x $2,500,000
$22,500
The Calgary division of TDI had the following financials in 2023:
- Sales were $10,500,000
- Expenses were $7,750,000
- Cash on hand was $1,575,000
- Assets on hand were $9,800,000
- Loans outstanding were $2,250,000
- Retained Earnings was $3,975,000
Required
- What is the annual bonus that Akash will receive for the 2023 operating year if hi?
- If Akash had the opportunity at the end of 2023 to take on a project that would cost $1,500,000 and produce Sales of 200,000 and incur expenses of $20,000. Would he accept the project given his current bonus structure?
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