Question 1

Vryburg Inc. operates with three divisions: Sishen, Hotazel, and Beaufort. Below are selected results for each division over the last two fiscal years.

Revenues: 2021 2020

Sishen $21,700,000 $26,500,000

Hotazel $14,200,000 $16,500,000

Beaufort $ 8,700,000 $ 9,000,000

Operating Income:

Sishen $ 1,620,000 $ 2,000,000

Hotazel $ 810,000 $ 1,300,000

Beaufort $ 945,000 $ 1,100,000

Average Total Assets:

Sishen $ 9,500,000 $10,000,000

Hotazel $ 6,500,000 $ 8,000,000

Beaufort $ 4,300,000 $ 4,500,000

Number of Managers:

Sishen 59 61

Hotazel 48 55

Beaufort 22 20

a. Calculate Return on Assets (ROA) for Vryburg in 2021 and 2020 (report percentages rounded two decimals).

b. Calculate Return on Sales (ROS) for Vryburg Inc. in 2021 and 2020 (report percentages rounded two decimals).

c. Industry Averages are 15% for ROA and 10% for ROS in 2021 and 2020. Discuss Vryburg's performance trends and results compared to industry averages (discuss performance, do not repeat calc's from above.

Question 2

Continuing with Vryburg Inc. from the previous page, Vryburg's manager compensation is an annual salary and qualifying bonus award. Managers qualify for the bonus award when their division ROA equals or exceeds Vryburg Inc. ROA. The bonus is calculated as Vryburg's Residual Income 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 8% of Average Total Assets.

a. For 2021, calculate each division's ROA and identify which divisions qualify for the bonus pool (report percentages rounded two decimals).

b. Calculate the 2021 bonus pool amount for total Vryburg Inc. and the bonus amount per manager (round amounts to the nearest whole dollar).

c. Based on your analysis, identify "Yes" or "No" if the bonus compensation plan helps Vryburg Inc. be goal congruent: ___________________________

d. Discuss the reasons for your answer in part c