The Atsakura intematconal Trading Compary plans to hire a mansger for its division in Guadalupe. Asakura Internationars president and vice presders of personnel are tying to decide on an appropriate incentive employment cortract. The manager will operate far from the Tokyo corporate headquarters, so evaluation by personsl observation will be limited. The president insisss that a large incertive to produce profits is necessary, he tavors a salary of *175,000 and a bonus of 10% of the peofits above 1,200,000. If operations proceed as expected, profits will be *4, 200,000 and the manager will receive 447,000 . But both profis and compensation might be more or less than planned. The vice pretidont of personnei responds that 475.000 is more than most of Asakura Intematonals division managers make. Sthe is sure that the company can hire a competent managor for a guaranteod salary of 375.000. She argued, "Why pay 475.000 when wo can probsbly hire the same person for 375,0009 ? Read the Requirement 1. What fachors would allect Asakura internationars choice of employment contract? Include a discussion of the pros and cons of each proposed coniract The bonus contract provides incertive to generase prots than does the straight salary it also imposes risk en the If the vice-prosidont of personnel is correct, the expected cost to Asabura intemational of this risk is k The choice be based on wheher the incentive under the bonus plan is laely to be worth the cost of the risk. Requirement 1. What factors would affect Asakura International's choice of emplc The bonus contract provides incentive to generate profits than does the to Asakura International of thi choice be based on less more t? Include a discussion of the pros and cons of each proposed contract. t also imposes risk on the centive under the bonus pl If the vice-president of personnel is correct, the expected cost i the cost of the risk. company. manager. incentive to generate profits than does the straight salary. It also in nal of this risk is . The choice be based on whether the incentive should should not Requirements 1. What factors would affect Asakura International's choice of employment contract? Include a discussion of the pros and cons of each proposed contract. 2. Why is the expected compensation more with the bonus plan than with the straight salary