MedLine Equipment Corporation specializes in the manufacture of medical equipment, a field that has become increasingly competitive- Approximately two years ago, Ben Harrington, president of MedLine, became concerned that the company's bonus plan, which focused on division protability, was not helping MedLine remain competitive. Harrington decided to implementa plan that would encourage employees to focus on operational areas that were importantto customers and that added value without increasing cost. To provide an incentive to employees to contribute ideas, a share of company profits would be awarded to employees, and there would be additional financial incentives for reduced rework costs, reduced sales returns, and ontime deliveries. Incentive bonuses, which would be distributed among the relevant employees according to a formula developed by the division manager, would be calculated and awarded semiannually on the following basis- Profitability: Two percent of operating income. Rework: Costs in excess of 2 percent of operating income are deducted from the bonus amount. lDntime delivery. $14,000 per employee if over 98 percent of deliveries are on time, $8,000 if 96 to 98 percent of deliveries are on time, and no increment if ontime deliveries are below 96 percent. Sales returns: $8,400 per employee if returns are less than 1.5 percent of sales. Fifty percent of any amount in excess of 1.5 percent ofsales is deducted from the bonus amount. Note: If the calculation of the incentive bonus results in a negative amount for a particular period, there is no bonus, and the negative amount is not carried forward to the next period. The revised incentive bonus plan was implemented on January 1, 20x1. Presented in the following table are the resutts for two of Medline's divisions, Charter and Mesa Divisions, for the rst year under the new bonus plan. Both ofthese divisions had similar sales and operating income results forthe prior year, when the old bonus plan was in effect. Based on the 20x0 results, the employees of the Charter Division earned an incentive bonus of $58,120 while the employees ofthe Mesa Division earned $52,150. Charter Division Mesa Division January 20x1- July 20x1- January 20x1- July 20x1- June 20x1 December 20x1 June 20x1 December 20x1 Sales $8, 800, 090 $9, 200,000 $6, 100, 000 $6, 200, 000 Operating income 968, 900 $ 920, 000 732, 000 $ 868,060 On-time delivery 95 . 3% 96.7% 98 .8% 95.4% Rework costs 25 , 400 24, 400 13, 600 16,809 Sales returns 169, 690 148, 000 97 , 500 89, 900Compute the Charter Division semiannual installments and total incentive bonus awarded for 20x1. First semiannual bonus awarded Second semiannual bonus awarded Total bonus awarded for the year 0First semiannual bonus awarded Second semiannual bonus awarded Total bun us awarded for the year