Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 40

Incentive Pay Formula Development Use the concepts in problem 20-38 to complete the following requirements.

Required

1. Design an incentive pay plan for a restaurant manager whose goals are to serve 300 customers per day at an average price per customer of $6.88. The restaurant is open 365 days per year. These two goals are equally important. The incentive pay should be $12,800 if the manager achieves all goals. Assume the manager’s salary is $68,000.

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2. Calculate the manager’s total compensation if the restaurant serves 280 customers per day at an average price of $6.75.

Step 1 of 5

Performance measurement

Performance measurement includes measures used by organization to evaluate performance of managers and employees. Based on the performance of managers companies provide bonus and compensation.