Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 6 percent of salary. Kevin's base salary is $190,000 and Michelle's is $250,000. The target profit for this year is $5 million. Kevin has read about a new manufacturing technique that would increase annual profit by 20 percent. He is unsure whether to employ the new technique this year, wait, or not employ it at all. Using the new technique will not affect the target. Required: a. Suppose that profit without using the technique this year will be $5 million. By how much will Kevin's and Michelle's bonus change if Kevin decides to employ the new technique? b. Suppose that profit without using the technique this year will be $7.5 million. By how much will Kevin's and Michelle's bonus change if Kevin decides to employ the new technique? Complete this question by entering your answers in the tabs below. Required A Required B Suppose that profit without using the technique this year will be $5 million. By how much will Kevin's and Michelle's bonus change if Kevin decides to employ the new technique? (Enter your answers in dollars, not in millions.) Bonus Change Kevin's Michelle's < Required A Required B >
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 6 percent of salary. Kevin's base salary is $190,000 and Michelle's is $250,000. The target profit for this year is $5 million. Kevin has read about a new manufacturing technique that would increase annual profit by 20 percent. He is unsure whether to employ the new technique this year, wait, or not employ it at all. Using the new technique will not affect the target. Required: a. Suppose that profit without using the technique this year will be $5 million. By how much will Kevin's and Michelle's bonus change if Kevin decides to employ the new technique? b. Suppose that profit without using the technique this year will be $7.5 million. By how much will Kevin's and Michelle's bonus change if Kevin decides to employ the new technique? Complete this question by entering your answers in the tabs below. Required A Required B Suppose that profit without using the technique this year will be $5 million. By how much will Kevin's and Michelle's bonus change if Kevin decides to employ the new technique? (Enter your answers in dollars, not in millions.) Bonus Change Kevin's Michelle's < Required A Required B >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for
manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid a flat salary and are eligible for a bonus. The
bonus is equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The maximum bonus is 6 percent of
salary. Kevin's base salary is $190,000 and Michelle's is $250,000.
The target profit for this year is $5 million. Kevin has read about a new manufacturing technique that would increase annual profit by
20 percent. He is unsure whether to employ the new technique this year, wait, or not employ it at all. Using the new technique will not
affect the target.
Required:
a. Suppose that profit without using the technique this year will be $5 million. By how much will Kevin's and Michelle's bonus change if
Kevin decides to employ the new technique?
b. Suppose that profit without using the technique this year will be $7.5 million. By how much will Kevin's and Michelle's bonus change
if Kevin decides to employ the new technique?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Suppose that profit without using the technique this year will be $5 million. By how much will Kevin's and Michelle's bonus
change if Kevin decides to employ the new technique? (Enter your answers in dollars, not in millions.)
Bonus Change
Kevin's
Michelle's
< Required A
Required B >
Transcribed Image Text:Required A Required B
Suppose that profit without using the technique this year will be $7.5 million. By how much will Kevin's and Michelle's bonus
change if Kevin decides to employ the new technique? (Round your intermediate percentage answers to nearest whole
percent. Enter your answers in dollars, not in millions.)
Bonus Change
Kevin's
Michelle's
< Required A
Required B >
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