Question

The following data are taken from the management accounting reports of Dancer Co.:

Div. A Div. B Div. C
Income from operations $3,600,000 $3,700,000 $2,700,000
Total service department charges 3,400,000 2,100,000 2,200,000

If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that
a. Division A's manager is given the bonus.
b. Division B's manager is given the bonus.
c. Division C's manager is given the bonus.
d. the managers of Divisions B and C divide the bonus.

Answer 1

Answer:

b. Division B's manager is given the bonus.

Explanation:

If the bonus is given to the manager that obtains the highest income from operations before service department charges, it follows that the manager of Division B is given the bonus because his income from operations is a total of $3,700,000 while the manager from division A got $3,600,000, and the manager from division C got $2,700,000.