Exercise 12-20 Evaluating Management Control Systems - Ethical Considerations (LO 12-3, 5 7)Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager.responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid aflat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10percent profit that exceeds a target. The maximum bonus is 5 percent of salary. Kevin?s base salary is$250,000 and Michelle?s is $310,000.The target profit for this year is $7 million. Kevin has read about a new manufacturing technique that wouldincrease annual profit by 20 percent He is unsure whether to employ the new technique this year. wait. ornot employ it at all. Using the new technique will not affect the target profit.Required:(a) Suppose that profit without using the technique this year will be $7 million. By how much will Kevin?sbonus change if he decides to employ the new technique? By how much will Michelle?s bonus change ifKevin decides to employ the new technique? (b) Suppose that profit without using the technique this year will be $95 million. By how much will Kevin?sbonus change if he decides to employ the new technique? By how much will Michelle?s bonus change ifKevin decides to employ the new technique? Exercise 12-20 Evaluating Management Control Systems - Ethical Considerations (LO 12-3, 5 7)Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager.responsible for manufacturing, and Michelle Michaels is the marketing manager. Both managers are paid aflat salary and are eligible for a bonus. The bonus is equal to 1 percent of their base salary for every 10percent profit that exceeds a target. The maximum bonus is 5 percent of salary. Kevin?s base salary is$250,000 and Michelle?s is $310,000.The target profit for this year is $7 million. Kevin has read about a new manufacturing technique that wouldincrease annual profit by 20 percent He is unsure whether to employ the new technique this year. wait. ornot employ it at all. Using the new technique will not affect the target profit.Required:(a) Suppose that profit without using the technique this year will be $7 million. By how much will Kevin?sbonus change if he decides to employ the new technique? By how much will Michelle?s bonus change ifKevin decides to employ the new technique? (b) Suppose that profit without using the technique this year will be $95 million. By how much will Kevin?sbonus change if he decides to employ the new technique? By how much will Michelle?s bonus change ifKevin decides to employ the new technique
