Boating Inc.manufactures water vessels and is organized into three large divisions: jet skis,fishing boats and yachts.The following information presents operating revenues,operating incomes and invested assets of the company over the last three years:
(All figures in 000s. )

Question

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The following table shows the number of managers covered by the current compensation package of Boating Inc.: 11ea6e70_bd9f_a44b_8f54_1d02b6242a97_TB1699_00 
The current compensation package is an annual bonus award.The managers share in the bonus pool.The pool is calculated as 10% of the annual residual income of the company.The residual income is defined as operating income minus an interest charge of 14% of invested assets.Required:(1)Compute the bonus amount to be paid during each year.Also,compute the (average)individual executive bonus amounts.(2)If the bonus was calculated by divisional residual income,what would be the bonus amounts?
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 Feedback: (1)Boating Inc.(multiply each bonus by 1,000 since all figures above are in thousands)
(Operating Income - (.14 x Invested Assets))x .10 = Bonus Amount
2009 [7,500 - (.14 x 6,200)] x .10 x 1000 = $663,200
2010 [6,200 - (.14 x 5,500)] x .10 x 1000 = $543,000
2011 [6,500 - (.14 x 6,500)] x .10 x 1000 = $559,000
Bonus Amount/Number of Executives = Average Bonus
2009 $663,200/500 = $1,326.40
2010 $543,000/440 = $1,234.09
2011 $559,000/480 = $1,164.58
(2)Jet Skis
2009 [500 - (.14 x 1,200)] x .10 x 1,000 = $33,200
2010 [700 - (.14 x 1,500)] x .10 x 1,000 = $49,000
2011 [1,000 - (.14 x 2,000)] x .10 x 1,000 = $72,000
Fishing Boats
2009 [3,000 - (.14 x 2,000)] x .10 x 1,000 = $272,000
2010 [2,500 - (.14 x 1,500)] x .10 x 1,000 = $229,000
2011 [2,000 - (.14 x 1,500)] x .10 x 1,000 = $179,000
Yachts
2009 [4,000 - (.14 x 3,000)] x .10 x 1,000 = $358,000
2010 [3,000 - (.14 x 2,500)] x .10 x 1,000 = $265,000
2011 [3,500 - (.14 x 3,000)] x .10 x 1,000 = $308,000