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5. Ontime Ltd delivers packages throughout the country. The packages are delivered to local depots which are then responsible for delivering them to addresses. Delivery
5. Ontime Ltd delivers packages throughout the country. The packages are delivered to local depots which are then responsible for delivering them to addresses. Delivery charges are based on size and distance but a transfer pricing system means that each local depot is credited with a sale based only on size. By phoning receipients a short time before delivery to ensure that they are at home, the company has a reputation for needing few callbacks to deliver parcels. This has lead to a good reputation and to the company being able to charge higher prices than competitors. The company has implemented a bonus scheme from the June to September quarter onwards. The scheme awards bonuses to each depot based on: (i) Profits - bonus of 2% on profits for the three months. (ii) On-time delivery - bonus of 0.2% of sales value of all on time deliveries if they are above 95% of all sales. (iii) Callbacks - a reduction of bonus by 0.1% of sales value of deliveries which required call back. The reculte of the denot in Fdinhuroh for the lact two marters is shown helow Required: (a) Calculate the bonus for the depot for each of the quarters shown. (9marks) (b) Calculate the average sales value of each on time delivery and each call back. (3 marks) (c) Comment on the trends in activity of the depot between the two periods and discuss any ways in which you think the current scheme may be leading to inappropriate behaviour by the employees. Make any recommendations for change which you think appropriate. (8 marks) (d) Briefly explain the reasons why non-financial performance measures are used by this organisation. (5 marks) (Total 25 marks)
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