CVP, executive teaching compensation. David Hutchinson is an internationally known Canadian professor specializing in consumer marketing. In 2009, Hutchinson and the United Kingdom Business School (UKBS) agreed to conduct a one-day seminar at UKBS for marketing executives. Each executive would pay 350 to attend. The non-speaker-related fixed costs for UKBS conducting the seminar would be

The dean at UKBS initially offered Hutchinson its regular compensation package of

(a) business-class airfare and accommodation (£3,800 maximum) and

(b) a £2,750 lecture fee. Hutchinson views the £2,750 lecture fee as providing him no upside potential (that is, no sharing in the potential additional operating income that arises if the seminar is highly attended). He suggests instead that he receive 50% of the operating income to UKBS (if positive) from the one-day seminar and no other payments. The dean of UKBS quickly agrees to Hutchinson’s proposal after confirming that Hutchinson is willing to pay his own airfare and accommodation and deliver the seminar irrespective of the number of executives signed up to attend.
REQUIRED 1. What is UKBS’s breakeven point (in number of executives attending) if

a. Hutchinson accepts the regular compensation package of £3,800 expenses and a £2,750 lecture fee.

b. Hutchinson receives 50% of the operating income to UKBS (if positive) from the oneday seminar and no other payments.
Comment on the results for

(a) and (b).
2. Hutchinson gave the one-day seminar at UKBS in 2006 (60 attended), 2007 (75 attended), and 2008 (120 attended). How much was Hutchinson paid by UKBS for the one-day seminar under the 50% of UKBS’s operating income compensation plan in

(a) 2006,

(b) 2007, and

(c) 2008? (Assume that the £350 charge per executive attending and UKBS’%s fixed and variable costs are the same each year.)
3. After the 2008 seminar, the dean at UKBS suggested to Hutchinson that the 50%—5 0%
profit-sharing plan was resulting in Hutchinson getting excessive compensation and that a more equitable arrangement to UKBS be used in 2009. How should Hutchinson respond to this suggestion?LO1

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Advertising in magazines Mailing of brochures Administrative labour at UKBS Charge for UKBS lecture auditorium 5,200 2,500 3,200 1,800 The variable costs to UKBS for each participant attending the seminar would be Food service Printed materials and binders 38 37