Complete the following questions: ( I have also included the questions in an attachment in case it does not come out properly)

• 19-34Compensation linked with profitability, waiting time, and quality measures.Seashore Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semiannual bonus plan for each medical group?s president has three components:
  • a.Profitability performance. Add 1.50% of operating income.
  • b.Average patient waiting time. Add $30,000 if the average waiting time for a patient to see a doctor after the scheduled appointment time is less than 15 minutes. If average patient waiting time is more than 15 minutes, add nothing.
  • c.Patient satisfaction performance. Deduct $35,000 if patient satisfaction (measured using a survey asking patients about their satisfaction with their doctor and their overall satisfaction with Seashore Healthcare) falls below 65 on a scale from 0 (lowest) to 100 (highest). No additional bonus is awarded for satisfaction scores of 65 or more.
  Semiannual data for 2013 for the Philadelphia and Baltimore groups are as follows:

  January?June

  July?December

  Philadelphia

  Operating income

  $11,150,000

  $10,000,000

  Average waiting time

  13 minutes

  17 minutes

  Patient satisfaction

  72

  66

  Baltimore

  Operating income

  $8,800,000

  $7,500,000

  Average waiting time

  20 minutes

  13 minutes

  Patient satisfaction

  59

  68

  Required
  • 1.Compute the bonuses paid in each half year of 2013 to the Philadelphia and Baltimore medical group presidents.
  • 2.Discuss the validity of the components of the bonus plan as measures of profitability, waiting time performance, and patient satisfaction. Suggest one shortcoming of each measure and how it might be overcome (by redesign of the plan or by another measure).
  • 3.Why do you think Seashore Healthcare includes measures of both operating income and waiting time in its bonus plan for group presidents? Give one example of what might happen if waiting time was dropped as a performance measure.
• 19-35Ethics and quality.Weston Corporation manufactures auto parts for two leading Japanese automakers. Nancy Evans is the management accountant for one of Weston?s largest manufacturing plants. The plant?s general manager, Chris Sheldon, has just returned from a meeting at corporate headquarters where quality expectations were outlined for 2014. Chris calls Nancy into his office to relay the corporate quality objective that total quality costs will not exceed 10% of total revenues by plant under any circumstances. Chris asks Nancy to provide him with a list of options for meeting corporate headquarters? quality objective. The plant?s initial budgeted revenues and quality costs for 2014 are as follows:

  Revenue	5,100,000
  Quality costs:
  Testing of purchased materials	48,000
  Quality control training for production staff	7,500
  Warranty repairs	123,000
  Quality design engineering	72,000
  Customer support	55,500
  Materials scrap	18,000
  Product inspection	153,000
  Engineering redesign of failed parts	31,500
  Rework of failed parts	27,000

  Prior to receiving the new corporate quality objective, Nancy had collected information for all of the plant?s possible options for improving both product quality and costs of quality. She was planning to introduce the idea of reengineering the manufacturing process at a one-time cost of $112,500, which would decrease product inspection costs by approximately 25% per year and was expected to reduce warranty repairs and customer support by an estimated 40% per year. After seeing the new corporate objective, Nancy is reconsidering the reengineering idea.Nancy returns to her office and crunches the numbers again to look for other alternatives. She concludes that by increasing the cost of quality control training for production staff by $22,500 per year, the company would reduce inspection costs by 10% annually and reduce warranty repairs and customer support costs by 20% per year as well. She is leaning toward only presenting this latter option to Chris because this is the only option that meets the new corporate quality objective.Required
  • 1.Calculate the ratio of each budgeted costs-of-quality category (prevention, appraisal, internal failure, and external failure) to budgeted revenues for 2014. Are the budgeted total costs of quality as a percentage of budgeted revenues currently less than 10%?
  • 2.Which of the two quality options should Nancy propose to the general manager, Chris Sheldon? Show the 2-year outcome for each option: (a) reengineer the manufacturing process for $112,500 and (b) increase quality training expenditure by $22,500 per year.
  • 3.Suppose Nancy decides not to present the reengineering option to Chris. Is Nancy?s action unethical? Explain.

19-34 Compensation linked with profitability, waiting time, and quality measures. Seashore Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semiannual bonus plan for each medical group's president has three components: a. Profitability performance. Add 1.50% of operating income. b. Average patient waiting time. Add $30,000 if the average waiting time for a patient to see a doctor after the scheduled appointment time is less than 15 minutes. If average patient waiting time is more than 15 minutes, add nothing. c. Patient satisfaction performance. Deduct $35,000 if patient satisfaction (measured using a survey asking patients about their satisfaction with their doctor and their overall satisfaction with Seashore Healthcare) falls below 65 on a scale from 0 (lowest) to 100 (highest). No additional bonus is awarded for satisfaction scores of 65 or more. Semiannual data for 2013 for the Philadelphia and Baltimore groups are as follows: July- January-June December Philadelphia Operating $11,150,000 income $10,000,000 Average 13 minutes 17 minutes waiting time Patient 72 66 satisfaction Baltimore Operating $8,800,000 $7,500,000 income Average 20 minutes 13 minutes waiting time Patient 59 68 satisfaction Required 1. Compute the bonuses paid in each half year of 2013 to the Philadelphia and Baltimore medical group presidents. 2. Discuss the validity of the components of the bonus plan as measures of profitability, waiting time performance, and patient satisfaction. Suggest one shortcoming of each measure and how it might be overcome (by redesign of the plan or by another measure). 3. Why do you think Seashore Healthcare includes measures of both operating income and waiting time in its bonus plan for group presidents? Give one example of what might happen if waiting time was dropped as a performance measure. Revenue Quality costs: Testing of purchased materials Quality control training for production staf Warranty repairs Quality design engineering Customer support Materials scrap Product inspection Engineering redesign of failed parts Rework of failed parts Prior to receiving the new corporate quality objective, Nancy had collected information for all of the plant's possible options for improving both product quality and costs of quality. She was planning to introduce the idea of reengineering the manufacturing process at a one-time cost of $112,500, which would decrease product inspection costs by approximately 25% per year and was expected to reduce warranty repairs and customer support by an estimated 40% per year. After seeing the new corporate objective, Nancy is reconsidering the reengineering idea. Nancy returns to her office and crunches the numbers again to look for other alternatives. She concludes that by 5,100,000 48,000 7,500 123,000 72,000 55,500 18,000 153,000 31,500 27,000 19-35 Ethics and quality. Weston Corporation manufactures auto parts for two leading Japanese automakers. Nancy Evans is the management accountant for one of Weston's largest manufacturing plants. The plant's general manager, Chris Sheldon, has just returned from a meeting at corporate headquarters where quality expectations were outlined for 2014. Chris calls Nancy into his office to relay the corporate quality objective that total quality costs will not exceed 10% of total revenues by plant under any circumstances. Chris asks Nancy to provide him with a list of options for meeting corporate headquarters' quality objective. The plant's initial budgeted revenues and quality costs for 2014 are as follows: 1. Calculate the ratio of each budgeted costs-ofquality category (prevention, appraisal, internal failure, and external failure) to budgeted revenues for 2014. Are the budgeted total costs of quality as a percentage of budgeted revenues currently less than 10%? 2. Which of the two quality options should Nancy propose to the general manager, Chris Sheldon? Show the 2-year outcome for each option: (a) reengineer the manufacturing process for $112,500 and (b) increase quality training expenditure by $22,500 per year. 3. Suppose Nancy decides not to present the reengineering option to Chris. Is Nancy's action unethical? Explain