Requirement 2. Alexa's bonus is based on meeting sales targets. Based on the preceding information regarding gross margin percentage, what might Alexa have done last quarter to meet her target and receive her bonus? How might FRS revise its bonus system to address this? If FRS awards bonuses based on sales rather than some measure of operating income, it may encourage sales representatives to FRS may want to consider basing bonuses on and enforce stringent discounting guidelines. The drop in gross margin percentage indicates that Alexa Dropping a customer. activity-based costing. ethia. Jason Actren'nan is the management accountant for Carey Fiestaumnt Supply {CREL Beth Donaldson. the CH5 sales manager, and Jason are meeting to discuss the protability of one of the customers, Martha Leone's Pizza. Jason hands Beth the following analysis of Martha Leone's actiyity during the last quarter. taken from Central's activity-based costing system: Bales HIM Godot goods sold Ial variable] 13ml] Urdar proclaiming murders prov: mad at $2131] pol arderl Um Usiraryii'lhilesdrhmatilpermilel 1.151] Hush orders {3 rod-I elders atllt per rush order} 15! Sales cst sales cat-s attiti] per call] tit] Pratt: I [552} Beth looks at the report and remarks, 'l'rn glad to see all my hard wort: is paying off with Martha Leone's. Sales have gone up with over the previous ouarter!' Jason replies. 'lncreased sales are great. but I'm wonied about Martha Leone's margin. Beth. We were showing a protwith Martha Leone's at the lower sales level. but now we're showing a loss Gross margin percentage this quarter was 40%. down ve percentage points from the priorguarter. I'm afraid that corporate will push hard to drop them as a customer ifthings don't turn around .' 'That's cracy.' Beth responds. 'A lot of that warhead for things lilte order processing. deliveries, and sales rails would just be allocated to othercustomers ii'we dropped Martha Leone's. This report makes it look lilte we're losing money on Martha Leone's when we're not. In any case. lam sure you can do something to make its protability looltcioser to what we think it is. No one doubts that Martha Leone's is a very good customer? 1. Assume that Beth is partly correct in her assessment ofthe report. Upon further irwestigation. it is determined that 10th otthe order processing costs and 20% ofthe delivery costs would not be avoidable ii CR3 were to drop Martha Leone's 1lI'liould CR5 benet from dropping Martha Leone's?I Show your calculations. 2. Beth's bonus is based on meeting sales targets. Based on the preceding information regarding gross margin percentage, what might Beth have done last guarterto meet her target and receive her bonus? How might CR5 revise its bonus system to address this?I 3. Sinuld Jason rework the numbers\"? How should he respond to Beth's comments about making Martha Leone's loot: more protable
