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Hi sir,
in q employees are awarded 5% annual bonus
in answer its stated that its 5% from their salaries, in q didnt mention that?
1) is it always the case that bonus is % of the salary?
I thought it can be % from the profit they acheived?
2) from the answer
“At 5% of salary, the bonus related to Cuthbert’s overall profits is relatively small”Whats is the % which is usually good then?
3)from the answer
“The machinists in their teams could also see it as unfair that the supervisors obtain a bonus based on what they see as their efforts”testing fairness.
However fairness is charateristic of standards not reward system? Plz clarify4) from the answer
“If the costs of direct labour were relatively low, even a large improvement in production efficiency by the machinists may have little effect on overall profit”
What do they mean here by direct labour. Do they mean employees salaries are already low?
Thank u so much
It does mention 5%: “The factory manager receives the same monthly salary regardless of production output. All employees are awarded a 5% annual bonus if Cuthbert achieves its budgeted net profit for the year.”
This is the third time you have recently thought that something said in the answer had no basis in the question when, in fact, it was plainly stated in the question. This is puzzling given that you presumably went back to the question to specifically look for that information after seeing the model answer.
You need to read the questions much more carefully, If you miss a vital piece of information, good marks will be impossible.
This also answers you point (1).
(2) Whether 5% is significant or no rather depends on the outlook of the employees and their expectations. It’s certainly not mega-generous, but not necessarily insignificant either. This is a point you could argue either way.
(3) Fairness is an integral part of a successful performance measurement and management system. How could it not be related to rewards? How would you feel if a colleague who did exactly the same work, but to a lower standard or achieving lower productivity, got a bonus that was twice yours? The Fitzgerald and Moon model should be seen as a whole.
(4) Direct labour = sewing, assembly and finishing. It says “IF the costs of direct labour were relatively low…”. So a large % drop in a small cost will not affect profit
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