a. Suppose the goal of the firm is to now provide superior customer service by having the sales con-

sultant identify and sell to the specific needs of the customer. What does this goal suggest about a

change in managerial accounting and control systems?

b. Provide an estimate of the impact of the incentive plan on sales.

c. Did the sales impact occur all at once, or did it occur gradually?

d. What is the impact of the incentive plan on wage expense as a percent of sales?

e. What is the impact of the incentive plan on cost of good sold as a percent of sales?

f. What is the impact of incentive plan on inventory turnover (turnover = cost of goods sold inven-

tory)? [If sales go up then stores are selling more goods; therefore, more goods need to be on the

floor or those goods on floor need to turn over faster.]

g. What is the additional dollar amount of inventory that must be held?

h. Using the information on sales and expenses for a typical store, provide an analysis of the additional

store profit contributed by the plan. Assume that it costs 12% a year to carry the added inventory.

i. Look at Exhibit 1, which provides a partial listing of employee pay for one small department within

a store. Which type of employee is receiving the bonus?

j. Should the company keep the plan? Explain your estimate of the financial impact of the plan and

also incorporate any nonfinancial information you feel is relevant in justifying your decision

C seaire https://mytusnesscourse comieraader/4S02page/144 144 LO1, 2,3 C4-35. Assessing the Impact of an Incentive Plan Overview Ladbrecks is a major departnent store with fifty retail outlets. The company's stores compete witlh outlets run by companies such as Nordstrom, Macys. Bloomingdales, and Saks Fifth Avenue. During the early nineties the company decided that providing excellent customer service was the key ingredi- ent for success in the retail industry. Therefore, during the mid 1990s the company implemented an incentive plan for its sales associates in twenty of its stores. Your job is to assess the financial impact of the plan and to provide a recommendation to management to continue or discontinue the plan based on your findings Incentives in Relail The past decade has evidenced a concerted effort by many firms to empower and motivate employees to improve performance. A recent New York Times article reported that more and more firms are of- fering bonus plans to hourly workers. An Ernst and Young survey of he retail industry indicates that virtually all department stores currently offer incentive programs such as straiglht commissions, base salary plus commission, and quota bonus programs. Although these programs can add to payroll costs, the survey respondents indicated that they believe these plans have contributed to major improvements in customier service Company's Background Ladbrecks was founded by members of the Ladbreck family in the 1880s. The first store opened under the name Ladbreck Dry Goods. Growth was fueled through acquisitions as the industry consolidated during the 1960s. Over lis hundred-year period, sales associates were paid a fixed hourly wage. Raises were based on seniority. Sales associates were expected to be neat and courteous to customers. The advent of C seaire https://mytusnesscourse comieraader/4S02page/144 144 LO1, 2,3 C4-35. Assessing the Impact of an Incentive Plan Overview Ladbrecks is a major departnent store with fifty retail outlets. The company's stores compete witlh outlets run by companies such as Nordstrom, Macys. Bloomingdales, and Saks Fifth Avenue. During the early nineties the company decided that providing excellent customer service was the key ingredi- ent for success in the retail industry. Therefore, during the mid 1990s the company implemented an incentive plan for its sales associates in twenty of its stores. Your job is to assess the financial impact of the plan and to provide a recommendation to management to continue or discontinue the plan based on your findings Incentives in Relail The past decade has evidenced a concerted effort by many firms to empower and motivate employees to improve performance. A recent New York Times article reported that more and more firms are of- fering bonus plans to hourly workers. An Ernst and Young survey of he retail industry indicates that virtually all department stores currently offer incentive programs such as straiglht commissions, base salary plus commission, and quota bonus programs. Although these programs can add to payroll costs, the survey respondents indicated that they believe these plans have contributed to major improvements in customier service Company's Background Ladbrecks was founded by members of the Ladbreck family in the 1880s. The first store opened under the name Ladbreck Dry Goods. Growth was fueled through acquisitions as the industry consolidated during the 1960s. Over lis hundred-year period, sales associates were paid a fixed hourly wage. Raises were based on seniority. Sales associates were expected to be neat and courteous to customers. The advent of