Question
Haam Inc. The manager compensation is an annual salary and qualifying bonus award. Managers qualify for the bonus award when their division ROA equals or
Haam Inc. The manager compensation is an annual salary and qualifying bonus award. Managers qualify for the bonus award when their division ROA equals or exceeds Haam Inc. ROA. The bonus is calculated as Haam Inc. Residual Income multiplied by a 60% pool payout amount, divided by the number of qualifying managers who then share equally in the bonus pool. Residual Income is defined as Operating Income minus an interest charge of 9% of Average Total Assets.
a. For 2022, calculate each divisions ROA and identify which divisions qualify for the bonus pool (report percentages rounded two decimals).
b. Calculate the 2022 bonus pool amount for total Haam Inc. and the bonus amount per manager.
c. Based on your analysis, identify Yes or No if the bonus compensation plan helps Haam be goal congruent. Next discuss the reasons for your answer.
\begin{tabular}{|c|c|c|} \hline Revenues: & 2022 & 2021 \\ \hline Central & 1,560,000 & 1,600,000 \\ \hline Atlantic & 2,625,000 & 2,500,000 \\ \hline Pacific & 4,000,000 & 4,100,000 \\ \hline Operating Income: & & \\ \hline Central & 120,000 & 110,000 \\ \hline Atlantic & 312,500 & 290,000 \\ \hline Pacific & 420,000 & 362,500 \\ \hline Average Total Assets: & & \\ \hline Central & 1,200,000 & 1,130,000 \\ \hline Atlantic & 1,900,000 & 2,000,000 \\ \hline Pacific & 2,800,000 & 2,500,000 \\ \hline Number of Managers: & & \\ \hline Central & 4 & 5 \\ \hline Atlantic & 9 & 10 \\ \hline Pacific & 11 & 10 \\ \hline \end{tabular}
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