MHR 523 Lecture Notes - Lecture 12: Piece Work, Capital Accumulation, Plans

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jadecockroach817

3 Mar 2017

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Fixed pay: compensation that is independent of the performance level of the individual, group, or organization. Variable pay: any plan that ties pay to productivity or pro tability. Team or group incentive plans: a plan in which a production standard is set for a speci c work group and its members are paid incentives if he group exceeds the production standard. Merit pay (merit raise): any salary increase awarded to an employee based on his or her individual performance. Pro t sharing plan: plan whereby most or all employees share in the company"s pro ts. Employee share purchase/stock ownership plan (esop): a plan whereby a trust is established to hold shares of company stock purchased for or issued to employees. The trust distributes the stock to employees on retirement, separation from service, or as otherwise prescribed by the plan. Gain sharing plans: an incentive plan that engages employees in a commonly effort to achieve productivity objectives and share the gains.

Related Questions

1. Ben Lieber is a waiter at Harbor House, where he receives aweekly wage of $81.20 plus tips for a 40-hour workweek. Lieber'sweekly tips usually range from $275 to $390.

Round your answers to the nearest cent.

a. Under the Fair Labor Standards Act, theminimum amount of wages that Lieber must receive for a 40-hourworkweek is

2. Carrie Overwood works fluctuating work schedules. Besides herfixed salary of $1,051 per week, her employment agreement providesfor overtime pay at an extra half-rate for hours worked over 40.This week she worked 48 hours. Compute the following amounts.

Round all divisions to two decimal places and use the roundedamounts in subsequent computations. Round your final answers to thenearest cent.

a. The overtime earnings
b. The total earnings

c. If this was a BELO plan with a pay rate of$23.45 per hour and a maximum of 48 hours, how much would Overwoodbe paid for 44 hours?

3. During the first week in November, Erin Mills worked 43.00hours and produced 1,217 units under a piece-rate system. Theregular piece rate is $0.32 a unit. Mills is paid overtimeaccording to the FLSA ruling for overtime work under a piece-ratesystem. Compute the following amounts.

Round all divisions to two decimal places and use the roundedamounts in subsequent computations. Round your final answers to thenearest cent.

a.	The piecework earnings
b.	The regular hourly rate
	The overtime hourly rate
c.	The overtime earnings
d.	The total earnings

4. Jill Connor is employed as a salesperson in the men'sdepartment of Fashion Line. In addition to her weekly base salaryof $349, Connor is paid a commission of 2% on her total net salesfor the week (total gross sales less any customer returns). Duringthe past week, to promote the sale of its fine cashmere sweaters,Fashion Line agreed to pay Connor an additional PM (push money) of3% of the total net sales of cashmere sweaters. Connor's weeklysales tally is given below.

Item	Gross Sales	Customer Returns
Regular sweaters	$391	$55
Cashmere sweaters	1012	74
Ties	177	0
Dress shirts	449	38
Sports shirts	199	29

Compute Connor's total weekly earnings, showing her (a) weeklybase salary, (b) commission, (c) PM, and (d) total weekly earnings.Round your intermediate and final answers to the nearest cent.

a.	Weekly base salary:
	Weekly gross sales
	Less customer returns
	Weekly net sales
b.	Commission: $ Ã 2%
	Weekly gross sales of cashmere sweaters
	Less customer returns
	Weekly net sales of cashmere sweaters
c.	Push money (PM): $ Ã 3%
d.	Total weekly earnings

Garnett Jackson, the founder and CEO of Tech Tune-Ups, stared t the window as he finished his customary peanut butter and jelly dwich, contemplating the dilemma currently facing his firm. ech Tune-Ups is a start-up firm, offering a wide range of com- ter services to its clients, including online technical assistance, ote maintenance and backup of client computers through the temet, and virus prevention and recovery. The firm has been 'ghly successful in the 2 years since it was founded; its reputation fair pricing and good service is spreading, and Mr. Jackson lieves the firm is in a good position to expand its customer base idly. But he is not sure that the firm has the financing in place to rt that rapid growth. Tech Tune-Ups' main capital investments are its own powerful mputers, and its major operating expense is salary for its consul- ts. To a reasonably good approximation, both of these factors w in proportion to the number of clients the firm serves. Currently, the firm is a privately held corporation. Mr. Jackson his partners, two classmates from his undergraduate days, have tributed $250,000 in equity capital, largely raised from their nts and other family members. The firm has a line of credit a bank that allows it to borrow up to $400,000 at an interest of 8%. So far, the firm has used $200,000 of its credit line. If when the firm reaches its borrowing limit, it will need to raise ity capital and will probably seek funding from a venture capi- firm. The firm is growing rapidly, requiring continual invest- t in additional computers, and Mr. Jackson is concerned that it approaching its borrowing limit faster than anticipated. 525 Mr. Jackson thumbs through past financial statements and esti- mates that each of the firm's computers, costing $10,000, can sup- port revenues of $80,000 per year but that the salary and benefits paid to each consultant using one of the computers is $70,000. Sales revenue in 2011 was $1.2 million, and sales are expected to grow at a 20% annual rate in the next few years. The firm pays taxes at a rate of 35%. Its customers pay their bills with an average delay of 3 months, so accounts receivable at any time are usually around 25% of that year's sales. Mr. Jackson and his co-owners receive minimal formal salary from the firm, instead taking 70% of profits as a "dividend," which accounts for a substantial portion of their personal incomes. The remainder of the profits are reinvested in the firm. If reinvested profits are not suffi- cient to support new purchases of computers, the firm borrows the required additional funds using its line of credit with the bank. Mr. Jackson doesn't think Tech Tune-Ups can raise venture funding until after 2013. He decides to develop a financial plan to determine whether the firm can sustain its growth plans using its line of credit and reinvested earnings until then. If not, he and his partners will have to consider scaling back their hoped-for rate of growth, negotiate with their bankers to increase the line of credit, or consider taking a smaller share of profits out of the firm until further financing can be arranged. Mr. Jackson wiped the last piece of jelly from the keyboard and settled down to work. Can you help Mr. Jackson develop a financial plan? Do you think his growth plan is feasible? Prepare a 700-1,050 word response, plus Excel spreadsheet, for the Mini-case at the end of Chapter 18 in Fundamentals of Corporate Finance (Brealey). Specifically, the Learning Team will need to follow all assumptions in the Mini-case precisely and carefully to complete the following: a. Identify the steps necessary to financially plan and forecast for 2005, 2006, and 2007, b. Project future years using the growth rate assumptions in the Mini-case, c. Determine what type and amount of financing may be required, taking into account the impact on leverage ratios, d. Determine the impact of rising interest rates on future performance, e. Assess alternative capital structures and impact on debt ratio and return on equity. f. Separately, after completing (a) through (e) above, explain how outsourcing certain cost of goods sold items would impact this planning and budgeting process.

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9.27 Direct cost and overhead variances; decision to automatePlush pet toys are produced in a largely automated factory instandard lots of 100 toys each. A standard cost system is used tocontrol costs and to assign cost to inventory. Price standardQuantity standard Plus fabric $2 per metre 15 metres per lot Directlabour $10 per hour 2 hours per lot Variable overhead, estimated at$5 per lot, consists of miscellaneous items such as thread, avariety of plastic squeakers, and paints that are applied to createfeatures such as eyes and whiskers. Fixed overhead, estimated at$24 000 per month, consists largely of depreciation on theautomated machinery and rent for the building. Variable overhead isallocated based on lots produced. The standard fixed overheadallocation rate is based on the estimated output of 1000 lots permonth. Actual data for last month follow. Production 2,400 lotsSales 1,600 lots Plus fabric purchased 30,000 metres Cost of fabricpurchased $62,000 Fabric used 34,000 metres Direct labour 4,200hours Direct labour cost $39,000 Variable overhead $12,000 Fixedoverhead $24,920 The entityâs policy is to record materials pricevariances at the time materials are purchased. Required (a)Calculate the commonly used direct cost and overhead variances. (b)Management is considering further automation in the factory.Robot-controlled forklifts could reduce the standard direct labourper lot to 1.5 hours. (i) Estimate the savings per lot that wouldbe realised from this additional automation. (ii) Assume thecompany would be able to generate the savings as calculated.Considering only quantitative factors, calculate the maximum pricethe managers would be willing to pay for the robot-controlledforklifts. Assume the companyâs management requires equipment coststo be recovered in five years, ignoring the time value of money.15.16 Big Bertram uses the just-in-time method to manufacture golfclubs. The manufacturing schedule for the clubs is developed ascustomers place orders. Each club is made within a cell where fiveworkers have production stations. The raw materials are deliveredto the cell as needed. Each worker in the cell performs one step inthe manufacturing process and then inspects the club before givingit to the next person. When a club is finished, it is set on afinished goods rack, which is sent to the packaging department atregular intervals. Required (a) What do we call a manufacturingsystem such as the one used by Big Bertram? (b) Describe generaladvantages of this type of system. (c) The supplier thatmanufactures the weights that are inserted in each club head wouldlike to monitor Big Bertramâs inventory levels through the internetso that its new software program could release deliveries atappropriate times. List qualitative factors that might affect BigBertramâs decision about this proposal.

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MHR 523 Lecture Notes - Lecture 12: Piece Work, Capital Accumulation, Plans

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