Revenues 2021 2020 Sishen $ 21,700,000 $ 26,500,000 Hotazel $ 14,200,000 $ 16,500,000 Beaufort $ 8,700,000 $ 9,000,000 Operating Income Sishen $ 1,620,000 $ 2,000,000 Hotazel $ 810,000 $ 1,300,000 Beaufort $ 945,000 $ 1,100,000 Average Total Assets Sishen $ 9,500,000 $ 10,000,000 Hotazel $ 6,500,000 $ 8,000,000 Beaufort $ 4,300,000 $ 4,500,000 # of Managers Sishen 59 61 Hotazel 48 55 Beaufort 22 20 Vryburg’s manager compensation is an annual salary and qualifying bonus award. Managers qualify for the bonus award when their division ROA equals or exceeds Vryburg Inc. ROA. The bonus is calculated as Vryburg’s 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 Vryburg Inc. and the bonus amount per manager (round amounts to the nearest whole dollar).
Revenues 2021 2020 Sishen $ 21,700,000 $ 26,500,000 Hotazel $ 14,200,000 $ 16,500,000 Beaufort $ 8,700,000 $ 9,000,000 Operating Income Sishen $ 1,620,000 $ 2,000,000 Hotazel $ 810,000 $ 1,300,000 Beaufort $ 945,000 $ 1,100,000 Average Total Assets Sishen $ 9,500,000 $ 10,000,000 Hotazel $ 6,500,000 $ 8,000,000 Beaufort $ 4,300,000 $ 4,500,000 # of Managers Sishen 59 61 Hotazel 48 55 Beaufort 22 20 Vryburg’s manager compensation is an annual salary and qualifying bonus award. Managers qualify for the bonus award when their division ROA equals or exceeds Vryburg Inc. ROA. The bonus is calculated as Vryburg’s 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 Vryburg Inc. and the bonus amount per manager (round amounts to the nearest whole dollar).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
| Revenues | 2021 | 2020 |
| Sishen | $ 21,700,000 | $ 26,500,000 |
| Hotazel | $ 14,200,000 | $ 16,500,000 |
| Beaufort | $ 8,700,000 | $ 9,000,000 |
| Operating Income | ||
| Sishen | $ 1,620,000 | $ 2,000,000 |
| Hotazel | $ 810,000 | $ 1,300,000 |
| Beaufort | $ 945,000 | $ 1,100,000 |
| Average Total Assets | ||
| Sishen | $ 9,500,000 | $ 10,000,000 |
| Hotazel | $ 6,500,000 | $ 8,000,000 |
| Beaufort | $ 4,300,000 | $ 4,500,000 |
| # of Managers | ||
| Sishen | 59 | 61 |
| Hotazel | 48 | 55 |
| Beaufort | 22 | 20 |
Vryburg’s manager compensation is an annual salary and qualifying bonus award. Managers qualify for the bonus award when their division ROA equals or exceeds Vryburg Inc. ROA. The bonus is calculated as Vryburg’s 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 Vryburg Inc. and the bonus amount per manager (round amounts to the nearest whole dollar).
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