Mason Ltd manufacturers batteries. The company consists of two divisions: Diesel Division and Solar Division. Mason Ltd has recently acquired a new company which will become a third division: Hybrid Division. The Hybrid Division is a small manufacturer of lawnmower batteries. It has been owned and managed by one person for 40 years. The prior owner treated all employees as part of his family. The company was noted for the lack of a them versus us attitude between employees and management, and there was free and open communication between all staff. Unfortunately, Hybrid Division is not a strong performer; the lawnmower market is in decline, and profits have slipped. Mason Ltd. is known for its modern management systems and would like all managers at Hybrid to participate in the performance-related pay system that is used in the other two divisions. The profitsharing plan applies to senior divisional managers only. It is based on placing 10% of Mason Ltd.s profits before interest and income tax into a pool, which is then shared by the senior divisional managers in direct proportion to their base salaries. The senior managers in the two original divisions received bonuses of 11% and 12% of their wages for the last two years before the acquisition of Hybrid. The profit results for the first financial year following the acquisition of the Hybrid Division, are as follows:

1. Which division has the best financial performance (based on ROI) in the first year after acquisition? Why? Explain.

2. Determine the bonus pool available for that year and calculate the percentage bonus that each senior manager would receive. ADVANCED MANAGEMENT ACCOUNTING ASSIGNMENT: 2 (CASE STUDY) (Contribution to final grade: 20%)

3. Discuss the behavioural problems that could arise among senior managers of the Diesel and Solar divisions because of the bonuses.

4. Discuss the behavioral problems that may arise within Hybrid Division from the changes in the performance-related pay system.

5. Suggest some changes that could be made to improve Mason Ltds performance-related pay system and alleviate some of the problems identified in (3) and (4) above.

6. Mason Ltd CEO is considering ROI results to evaluate its three divisions (Diesel, Solar and Hybrid) long-term financial feasibility and competitiveness. Provide four examples of situations where the use of ROI can lead to decisions which may harm the future competitiveness of a company. Explain your examples and reasons.

Senior management salaries included in the above costs, and divisional assets at the end of that year, are as follows: Prior to the acquisition by Mason Ltd, all Hybrid employees, including the senior managers, participated in the gainsharing program. Under this program, the financial impact of improvements in labour productivity and delivery performance were quantified each quarter and 50% of this amount was accumulated in a pool. At the end of each year, each employee received an equal share of the pool. The scheme was discontinued when Mason Ltd purchased Hybrid