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Introduction Wingo's Widgets is a large privately held company headquartered in Lincoln, Nebraska that provides specialty widgets to companies all over the world. The
Introduction Wingo's Widgets is a large privately held company headquartered in Lincoln, Nebraska that provides specialty widgets to companies all over the world. The company was founded in 1960 by Wingo Tillman as a family business employing 5 employees. As of yearend 2020 the company employs over 850 employees. The current CEO of the company is Charles Tillman, Wingo's grandson. Relevant Personnel Tonya Griff was hired by Charles Tillman in 2015 as a consultant. The company had been experiencing a period of growing pains leading to order shortfalls and lost revenues. The company lacked the capacity to keep up with thriving demand. Charles was impressed with Tonya's vision to decentralize production to five strategically placed plants near the company's headquarters. Each of the five locations were in similar working-class localities. This would allow the company to expand operations and enhance distribution channels. All five plants were operational by the end of 2017. Tonya was promoted to AVP of Production and was put in charge of managing the plants. Charles gave Tonya permission to hire additional personnel as needed to support operations. For several months Tonya tried to manage all five plants herself, but quickly realized she was in over her head. It was too difficult managing the day-to-day operation of the five plants when she was physically located at headquarters. In April of 2018 Tonya hired five production managers to oversee each of the five locations. As shown in Figure 1, Gregg, Sarah, Lisa, Armando, and Isiah each report directly to Tonya. Labor Standards and Expectations While Tonya was skilled at growing the business, dealing with human resource and compensation related items were not in her wheelhouse. She confided in a few of her mentors in similar industries for advice on how to manage her new direct reports. It was recommended that she construct standard labor efficiency and standard labor rates to serve as overall guidance for the plant managers. These standards would serve as benchmarks to help guide each of the managers. Tonya recommended that each manager follow the standards developed, however she allowed each of the managers the flexibility to deviate from standards as they deemed appropriate. Hitting the production target was all that Tonya cared about. For 2020, Tonya informed each manager that they were responsible for processing 20,000 widgets per month (240,000 for the year). Based on the standards, the expected labor cost for each plant would be $480,000 for the year. See Table 1 for the standards developed by Tonya and her calculation of total labor expense. Bonus Allocations Wingo's Widgets had a profitable 2020. In January of 2021, Charles met with Tonya and informed her that there was $50,000 available in the bonus pool specifically for the five production managers. Tonya was responsible for allocating the bonuses as she saw fit. Tonya recalled that each manager successfully met the goal of processing the 240,000 units requested, so she deemed it fair to reward each of the managers equally. She also looked at the spending variance report and noted that direct labor was slightly a favorable variance. In her mind, each manager must have been on par with the others, and it wasn't worth digging into given the small variance that existed. Tonya sent an email to
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