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