Scanlon plans represent a group-level incentive plan that provides payouts based
ID: 2260791 • Letter: S
Question
Scanlon plans represent a group-level incentive plan that provides payouts based on whether the implementation of proposals for labor costs savings are successful. Among the important determining factors is the calculation of Scanlon ratios (labor costs / sales value of production). Scanlon ratios are compared to a standard. Payouts are made whenever the Scanlon ratio is less than the standard.
The Scanlon ratio for 2014 is 0.70, and it is the standard for comparison. Assume that in 2015, total labor costs amounted to $48,000,000 and sales value of production(SVOP) amounted to $50,000,000. Also, assume that total labor costs will increase by 10.0 percent annually and SVOP will increase by 3.0 percent annually starting in 2016.
a) The Scanlon ratio for 2015 will be .96 Round your response to the nearest hundredths place.
b) The Scanlon ratio for 2016 will be 1.03. Round your response to the nearest hundredths place.
c) The Scanlon ratio for 2017 will be 1.09. Round your response to the nearest hundredths place.
d) The Scanlon ratio for 2018 will be 1.14. Round your response to the nearest hundredths place.
a) The total dollars available for bonus payout in 2015 will be $__________.
b) The total dollars available for bonus payout in 2016 will be $__________.
c) The total dollars available for bonus payout in 2017 will be $__________.
d) The total dollars available for bonus payout in 2018 will be $__________.
The first answer A (.96) is correct. But, the answers to B, C, and D, say something is wrong, but it does not tell me which one(s). Also, I do not know how to work the last step A-D. Will someone please work this for me?
Explanation / Answer
See from the year 2016 total labor costs is increasing by 10% annually and SVOP by 3%.
So in 2016:
labor costs= labor costs in 2015+ (10 % of labor costs in 2015)
=48,000,000+ 10% of 48,000,000
=52,800,000
and SVOP= SVOP in 2015 + 3% of Svop in 2015
=50,000,000+ 3% of 50,000,000
=51,500,000
so scanlon ratio =52,800,000/51,500,000
=1.02524...
which is approximate to 1.03
now in 2017:
labor costs= labor costs in 2016+ (10 % of labor costs in 2016)
=52,800,000+ 10% of 52,800,000
=58,080,000
and SVOP=SVOP in 2016 + 3% of Svop in 2016
=51,500,000+ 3% of 51,500,000
=53,045,000
so scanlon ratio =58,080,000/53,045,000
=1.09
similarly
in 2018:
abor costs= labor costs in 2017+ (10 % of labor costs in 2017)
=58,080,000+ 10% of 58,080,000
=63,888,000
and SVOP= SVOP in 2015 + 3% of Svop in 2015
=53,045,000+ 3% of 53,045,000
=54,636,000
scanlon ration=63,888,000/54,636,000
=1.17
for the second part :
a) total dollars availbale for bonus payout would be= total labor costs-SVOP
that is equal to , 52,800,000-51,500,000=1,300,000
similarly proceed in other years.
if further you have doubt ,ask in the comment section.
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