The June 1997 issue of Management Accounting gave the following rule for predicting your current salary if you are a managerial accountant. Take $31,865. Next, add $20,811 if you are top management, add $3604 if you are senior management, or subtract $11,419 if you are entry management. Then add $1105 for every year you have been a managerial accountant. Add $7600 if you have a master’s degree or subtract $12,467 if you have no college degree. Add $11,257 if you have a professional certification. Finally, add $8667 if you are male.
a. How do you think the journal derived this method of predicting an accountant’s current salary? Be specific.
b. How could a managerial accountant use this information to determine whether he or she is significantly underpaid?