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

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. In 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 revenue will be earned and when the discretionary costs will be incurred.

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3 Revenue 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) Profit (18,000) 25,000