Corporate Decision Making and Incentives Assignment
Please read the attached case Spotted Rhino Corp. and answer the questions.
Case - Spotted Rhino Corp
Questions:
A. Using the data in Exhibit 1, how does the bonus bank balance and bonus payouts evolve for a Jungle manager whose pay-performance sensitivity is 5%, given an improvement goal for residual income of $300,000 each year?
B. Discuss the key challenges arising from the windfall situation in 2018. What could be done to improve the situation?
C. Let's verify Joan's "back-of-the-envelope" calculations. Does internally generating the intangible really create greater shareholder value than acquiring it?
D. How does the decision look like through the lens of a business unit manager compensated based on Jungle's divisional residual income, which in turn is calculated based on GAAP rules? What could be done to improve the situation?
Textbook - Cost Accounting A Managerial Emphasis, Fifteenth Edition by Charles T. Horngren, Srikant M. Datar and Madhav V. Rajan.
Attachment:- Assignment File - Case & Questions.rar