The following data has been taken from the management accounting reports from Sp
ID: 2381152 • Letter: T
Question
The following data has been taken from the management accounting reports from Spinnaker Sales. Div A -Income from operations $1,800,000 Total service department charges $1,600,000. Div B - Income from operations $1,350,000 Total service department charges $950,000. Div C - Income from operations $1,350,000 Total service department charges $1,000,000. If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges which division manager would receive the incentive. Please explain why?
Explanation / Answer
Division A:
Income from operations = $1,800,000
Total service department charges = $1,600,000
Benefit = $200,000 ($1,800,000-$1,600,000)
Division B:
Income from operations = $1,350,000
Total service department charges = $950,000
Benefit = $400,000 ($1,350,000-$950,000)
Division C:
Income from operations = $1,350,000
Total service department charges = $1,000,000
Benefit = $350,000 ($1,350,000-$1,000,000)
Division B manager would receive incentive for highest income from operations because his benefit is more than other divisions.
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