Does the Bonus Plan Reward the Right Thing? Roaring Springs Booksellers is an Internet book…

Does the Bonus Plan Reward the Right Thing?

Roaring Springs Booksellers is an Internet book company. Customers choose their purchases from an online catalog and make their orders online. Roaring Springs then assembles the books from its warehouse inventory, packs the order, and ships it to the customer within three working days. The rapid turnaround time on orders requires Roaring Springs to have a large warehouse staff; wage expense averages almost 20% of sales.
Each member of Roaring Springs’s top management team receives an annual bonus equal to 1% of his or her salary for every 0.1% that Roaring Springs’s return on sales exceeds 5.0%. For example, if return on sales is 5.3%, each top manager would receive a bonus of 3% of salary. Historically, return on sales for Roaring Springs has ranged between 4.5% and 5.5%.
The management of Roaring Springs has come up with a plan to dramatically increase return on sales, perhaps to as high as 6.5% to 7.0%. The plan is to acquire a sophisticated, computerized packing machine that can receive customer order information, mechanically assemble the books for each order, box the order, print an address label, and route the box to the correct loading dock for pickup by the delivery service. Acquisition of this machine will allow Roaring Springs to lay off 100 warehouse employees, resulting in a significant savings in wage expense. Top management intends to acquire the machine by using new investment capital from stockholders and thus avoid an increase in interest expense. Because the depreciation expense on the new machine will be much less than the savings in reduced wage expense, return on sales will increase.
All the top managers of Roaring Springs are excited about the new plan because it could increase their bonuses to as much as 20% of salary. As assistant to the chief financial officer of Roaring Springs, you have been asked to prepare a briefing for the board of directors explaining exactly how this new packing machine will increase return on sales. As part of your preparation, you decide to examine the impact of the machine acquisition on the other two components of the DuPont framework—efficiency and leverage. You find that even with the projected increase in return on sales, the decrease in asset turnover and in the assets-to-equity ratio will cause total return on equity to decline from its current level of 18% to around 14%.
Your presentation is scheduled for the next board of directors meeting in two weeks. What should you do?

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!