Peter Jenkins manages a department and has the following budget for the year. LO1

= £

Sales 100,000 Discretionary costs:

Purchases (20,000)

Advertising (10,000)

Training (8,000)

Repairs (19,000) (57,000)

43,000 Non-discretionary costs:

Labour (split equally throughout the year) (18,000)

Profit 25,000 Peter receives a budget of 10% of profit for any quarter in which he makes a minimum profit of £8,000. If he makes less than £8,000 profit, he receives no bonus. Any quarter in which he makes a loss he will earn no profit, but will not incur a penalty.

Required:

Calculate the maximum and minimum bonuses Peter could expect. Assume Peter has complete discretion about when the sales will be earned and when the discretionary costs will be incurred.