a mug company makes mugs They have capacity for 50 million but the recession cut production and sales in the current year to 15 million mugs . The income statement is Sales (15 million at $2) $30 Less cost of goods sold Variable cost 15million at $.50. (7.5) Fixed cost (20) Gross margin 2.5 Less selling and admin -4.0 Operating profit (1.5) Concerned with the loss they hired a new president with an employment contract that pays a fixed wage of $50,000 a year plus 15 percent of the firms operating profits . Operating profits are calculated using absorption costing . In 2017 the new president doubles the selling and admin budget to $8 moon which includes the presidents salary of $50,000 Production is increased to 45 million mugs and sales climb to 18 million mugs at $2 each. Variable costs per mug remain at $.50 and fixed costs at $20 million in 2017. A) Calculate the president's bonus for 2017 B) Evaluate the performance of the new president in 2017 Did he do as good a job as the numbers in part A suggest
a mug company makes mugs They have capacity for 50 million but the recession cut production and sales in the current year to 15 million mugs . The income statement is Sales (15 million at $2) $30 Less cost of goods sold Variable cost 15million at $.50. (7.5) Fixed cost (20) Gross margin 2.5 Less selling and admin -4.0 Operating profit (1.5) Concerned with the loss they hired a new president with an employment contract that pays a fixed wage of $50,000 a year plus 15 percent of the firms operating profits . Operating profits are calculated using absorption costing . In 2017 the new president doubles the selling and admin budget to $8 moon which includes the presidents salary of $50,000 Production is increased to 45 million mugs and sales climb to 18 million mugs at $2 each. Variable costs per mug remain at $.50 and fixed costs at $20 million in 2017. A) Calculate the president's bonus for 2017 B) Evaluate the performance of the new president in 2017 Did he do as good a job as the numbers in part A suggest
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