1. J. Keith Baker © 2015 Master Budgeting & Responsibility Accounting Chapter 6 ACCT 3270 Spring - 2016 Jay K. Baker, MSFS, MBA, CPA, CFP®

2. 6-2 J. Keith Baker © 2015 Budget Defined  The quantitative expression of a proposed plan of action by management for a specified period, and  An aid to coordinating what needs to be done to implement that plan  May include both financial and nonfinancial data LO 6-1 Describe the Master Budget & Explain its Benefits A budget is a plan that covers a specific period of time. It helps management determine how best to use its resources – both materials and manpower. Management estimates future cost and revenues

3. 6-3 J. Keith Baker © 2015 Strategy, Planning, and Budgets, Illustrated

4. 6-4 J. Keith Baker © 2015 Budgets help managers….  Communicate directions and goals to different departments of a company to help them coordinate the actions they must pursue to satisfy customers and succeed in the marketplace.  Judge performance by measuring financial results against planned objectives, activities, and timelines to learn about potential problems.  Motivate employees to achieve their goals.

5. 6-5 J. Keith Baker © 2015 Strategic plans and operating plans To develop successful strategies, managers must consider questions such as the following: 1. What are our objectives? 2. How do we create value for our customers while distinguishing ourselves from our competitors? 3. Are the markets for our products local, regional, national or global? 4. What trends affect our markets? 5. What organizational and financial structures serve us best? 6. What are risks and opportunities of alternative strategies and what are our contingency plans if our preferred plan fails?

6. 6-6 J. Keith Baker © 2015 Budgeting cycle: 1. Before the start of a fiscal year, managers at all levels take into account past performance, market feedback, anticipated future changes and other indicators to initiate plans for the next period. 2. Senior managers give subordinate managers a frame of reference against which they will compare actual results. 3. Managers and management accountants investigate any deviations from the plan.

7. 6-7 J. Keith Baker © 2015 Working document: Master Budget The master budget is at the core of the budgeting process. It expresses management’s operating and financial plans for a specified period:  Operating decisions deal with how to best use the limited resources of an organization. (the operating budget)  Financial decisions deal with how to obtain the funds to acquire those resources. (the financial budget) 6-7

8. 6-8 J. Keith Baker © 2015J. Keith Baker © 2013 Master Budget Components Master Budget Operating Budget Financial Budget Capital Expenditure Budget

9. 6-9 J. Keith Baker © 2015 Master Budget Components  Operating budget – Supporting budget schedules – Revenue budget – Production budget in units – Direct materials purchase budget

10. 6-10 J. Keith Baker © 2015 Master Budget Components – Direct labor budget – Cost of goods sold budget – Nonmanufacturing costs budget – Budgeted income statement

11. 6-11 J. Keith Baker © 2015 Master Budget Components  Financial budget – Capital budget – Cash budget – Budgeted balance sheet – Budgeted statement of cash flows

12. 6-12 J. Keith Baker © 2015 Advantages of Budgets LO 6-2 Describe the Advantages of budgets. Provides a framework for judging performance #2 Promotes coordination and communication #1 Motivates employees and managers #3

13. 6-13 J. Keith Baker © 2015 Challenges in administering a budget  Top managers want lower-level managers to participate in the budgeting process because they have more specialized knowledge of day-to-day management, however…  The budgeting process is time-consuming, and  Upper-level management’s support is crucial

14. 6-14 J. Keith Baker © 2015 The Ongoing Budget Process: 1. Managers and accountants plan the performance of the company, taking into account past performance and anticipated future changes. 2. Senior managers distribute a set of goals against which actual results will be compared.

15. 6-15 J. Keith Baker © 2015 The Ongoing Budget Process: 3. Accountants help managers investigate deviations from budget. Corrective action occurs at this point. 4. Managers and accountants assess market feedback, changed conditions, and their own experiences as plans are laid for the next budget period.

16. 6-16 J. Keith Baker © 2015 Basic Operating Budget Steps 1. Prepare the revenues budget (schedule 1; the starting point) Page 206 2. Prepare the production budget (schedule 2; in units). Page 207 3. Prepare the direct materials usage budget and direct materials purchases budget (schedule 3) Pages 207 and 208 4. Prepare the direct manufacturing labor budget (schedule 4) Page 208 LO 6-3 Preparing the Operation Budget.

17. 6-17 J. Keith Baker © 2015 Basic Operating Budget Steps 5. Prepare the manufacturing overhead costs budget (schedule 5) Page 210 6. Prepare the ending inventories budget (schedule 6A, units; schedule 6B, dollars) Pages 211 and 212 7. Prepare the cost of goods sold budget (schedule 7) Page 212 8. Prepare the operating expense (period cost) budget (schedule 8) Page 213 9. Prepare the budgeted income statement Exhibit 6-3 page 213

18. 6-18 J. Keith Baker © 2015 Operating Budget Sales budget Operating expense budget Purchases & cost of goods sold budget Inventory budget Budgeted income statement

19. 6-19 J. Keith Baker © 2015 Basic Financial Budget Steps Based on the operating budgets: 1. Prepare the capital expenditures budget. 2. Prepare the cash budget. 3. Prepare the budgeted balance sheet. 4. Prepare the budgeted statement of cash flows.

20. 6-20 J. Keith Baker © 2015 Sample Master Budget, Illustrated

21. 6-21 J. Keith Baker © 2015J. Keith Baker © 2013 Operating Budget Example Hawaii Diving expects 1,100 units to be sold during the month of August 2013. Selling price is expected to be $240 per unit. How much are budgeted revenues for the month? 1,100 × $240 = $264,000

22. 6-22 J. Keith Baker © 2015J. Keith Baker © 2013 Operating Budget Example Two pounds of direct materials are budgeted per unit at a cost of $2.00 per pound, $4.00 per unit. Three direct labor-hours are budgeted per unit at $7.00 per hour, $21.00 per unit. Variable overhead is budgeted at $8.00 per direct labor-hour, $24.00 per unit. Fixed overhead is budgeted at $5,400 per month.

23. 6-23 J. Keith Baker © 2015J. Keith Baker © 2013 Operating Budget Example Variable nonmanufacturing costs are expected to be $0.14 per revenue dollar. Fixed nonmanufacturing costs are $7,800 per month.

24. 6-24 J. Keith Baker © 2015J. Keith Baker © 2013 Production Budget Example Budgeted sales (units) Target ending finished goods inventory (units) Beginning finished goods inventory (units) Budgeted production (units) + – =

25. 6-25 J. Keith Baker © 2015J. Keith Baker © 2013 Production Budget Example Assume that target ending finished goods inventory is 80 units. Beginning finished goods inventory is 100 units. How many units need to be produced?

26. 6-26 J. Keith Baker © 2015J. Keith Baker © 2013 Production Budget Example Hawaii Diving Production Budget for the Month of August 2015 Units required for sales1,100 Add ending inv. of finished units 80 Total finished units required1,180 Less beg. inv. of finished units 100 Units to be produced1,080

27. 6-27 J. Keith Baker © 2015J. Keith Baker © 2013 Direct Materials Usage Budget Each finished unit requires 2 pounds of direct materials at a cost of $2.00 per pound. Desired ending inventory equals 15% of the materials required to produce next month’s sales. September sales are forecasted to be 1,600 units. What is the ending inventory in August? 480 pounds

28. 6-28 J. Keith Baker © 2015J. Keith Baker © 2013 Direct Materials Usage Budget September sales: 1,600 × 2 pounds per unit = 3,200 pounds 3,200 × 15% = 480 pounds (the desired ending inventory) What is the beginning inventory in August? 1,100 units × 2 × 15% = 330 units

29. 6-29 J. Keith Baker © 2015J. Keith Baker © 2013 Direct Materials Usage Budget How many pounds are needed to produce 1,080 units in August? 1,080 × 2 = 2,160 pounds

30. 6-30 J. Keith Baker © 2015J. Keith Baker © 2013 Material Purchases Budget Hawaii Diving Direct Material Purchases Budget for the Month of August 2015 Units needed for production 2,160 Target ending inventory 480 Total material to provide for 2,640 Less beginning inventory 330 Units to be purchased 2,310 Unit purchase price$ 2.00 Total purchase cost$4,620

31. 6-31 J. Keith Baker © 2015J. Keith Baker © 2013 Direct Manufacturing Labor Budget Hawaii Diving Direct Labor Budget for the Month of August 2015 Units produced: 1,080 Direct labor-hours/unit 3 Total direct labor-hours: 3,240 Total budget @ $7.00/hour:$22,680 Each unit requires 3 direct labor-hours at $7.00 per hour.

32. 6-32 J. Keith Baker © 2015J. Keith Baker © 2013 Manufacturing Overhead Budget Variable overhead is budgeted at $8.00 per direct labor-hour. Fixed overhead is budgeted at $5,400 per month.

33. 6-33 J. Keith Baker © 2015J. Keith Baker © 2013 Manufacturing Overhead Budget Hawaii Diving Manufacturing Overhead Budget for the Month of August 2015 Variable Overhead: (3,240 × $8.00)$25,920 Fixed Overhead 5,400 Total$31,320

34. 6-34 J. Keith Baker © 2015J. Keith Baker © 2013 Ending Inventory Budget Cost per finished unit: Materials$ 4 Labor 21 Variable manufacturing overhead 24 Fixed manufacturing overhead 5* Total$54 *$5,400 ÷ 1,080 = $5

35. 6-35 J. Keith Baker © 2015J. Keith Baker © 2013 Ending Inventory Budget What is the cost of the target ending inventory for materials? 480 × $2 = $960 What is the cost of the target finished goods inventory? 80 × $54 = $4,320

36. 6-36 J. Keith Baker © 2015J. Keith Baker © 2013 Cost of Goods Sold Budget Direct materials used: 2,160 × $2.00$ 4,320 Direct labor 22,680 Total overhead 31,320 Cost of goods manufactured $58,320

37. 6-37 J. Keith Baker © 2015J. Keith Baker © 2013 Cost of Goods Sold Budget Ending finished goods inventory is $4,320. What is the cost of goods sold? Assume that the beginning finished goods inventory is $5,400.

38. 6-38 J. Keith Baker © 2015J. Keith Baker © 2013 Cost of Goods Sold Budget Beginning finished goods inventory$ 5,400 + Cost of goods manufactured$58,320 = Goods available for sale$63,720 – Ending finished goods inventory$ 4,320 = Cost of goods sold$59,400

39. 6-39 J. Keith Baker © 2015J. Keith Baker © 2013 Nonmanufacturing Costs Budget Hawaii Diving Other Expenses Budget for the Month of August 2015 Variable Expenses: ($0.14 × $264,000) $36,960 Fixed expenses 7,800 Total$44,760

40. 6-40 J. Keith Baker © 2015J. Keith Baker © 2013 Cost of Goods Sold Budget Cost of goods sold are budgeted at $59,400. What is the budgeted gross margin? Hawaii Diving has budgeted sales of $264,000 for the month of August.

41. 6-41 J. Keith Baker © 2015J. Keith Baker © 2013 Budgeted Statement of Income Hawaii Diving Budgeted Income Statement for the Month ending August 31, 2015 Sales$264,000100% Less cost of sales 59,400 22% Gross margin $204,600 78% Other expenses 44,760 17% Operating income$159,840 61%

42. 6-42 J. Keith Baker © 2015J. Keith Baker © 2013 Learning Objective 4 Use computer-based financial planning models in sensitivity analysis.

43. 6-43 J. Keith Baker © 2015 Revenues/Sales Budget  Plan for sales revenues in a future period  Budgeted sales revenue = sale price per unit x expected number of units to be sold

44. 6-44 J. Keith Baker © 2015 E 6-16 1. Sales Budget Example Rouse & Sons2011SellingChange in Volume - Expected 2012 Volume Volume Prices Radon Tests 12,200$290 +6% 12,932 Lead Tests 16,400$240 -10% 14,760 Rouse & Sons Sales Budget For the Year Ended December 31, 2012 Selling Units Price Sold Total Revenues Radon Tests $290 12,932 $ 3,750,280 Lead Tests $240 14,760 3,542,400 $ 7,292,680

45. 6-45 J. Keith Baker © 2015 E 6-16 2. Sales Budget Example Rouse & Sons2011SellingChange in Volume - Expected 2012 Volume Volume Prices Radon Tests 12,200$290 +6% 12,932 Lead Tests 16,400$230 -7% 15,252 Rouse & Sons Sales Budget For the Year Ended December 31, 2012 Selling Units Price Sold Total Revenues Radon Tests $290 12,932 $ 3,750,280 Lead Tests $230 15,252 3,507,960 $ 7,258,240 Expected revenues at the new 2012 prices are $7,258,240, which is lower than the expected 2012 revenues of $7,292,680 if the prices are unchanged. So, if the goal is to maximize sales revenue and if Jim Rouse’s forecasts are reliable, the company should not lower its price for a lead test in 2012.

46. 6-46 J. Keith Baker © 2015 Purchases = Cost of goods sold + Ending inventory– Beginning inventory Inventory, Purchases, and Cost of Goods Sold Budget Cost of goods sold = Beginning inventory + Purchases– Ending inventory KnownCompute Unknown

47. 6-47 J. Keith Baker © 2015 E 6-20 Revenues & Production Budget 1. Selling Units Price Sold Revenues 12-ounce bottles $0.25 4,800,000 a $1,200,000 4-gallon units 1.50 1,200,000 b 1,800,000 $3,000,000 a 400,000 × 12 months = 4,800,000 b 100,000 × 12 months = 1,200,000 2. Budgeted unit sales (12-ounce bottles) 4,800,000 Add target ending finished goods inventory 600,000 Total requirements 5,400,000 Deduct beginning finished goods inventory 900,000 Units to be produced4,500,000 3. BeginningBudgetedTarget _Budgeted inventory =sales +ending inventory production = 1,200,000 + 200,000 − 1,300,000 = 100,000 4-gallon units

48. 6-48 J. Keith Baker © 2015 Financial Budget Components  Cash budget  Budgeted balance sheet  Budgeted statement of cash flows

49. 6-49 J. Keith Baker © 2015 Cash Budget Components  Cash receipts and cash payments for a future period  The Cash Budget has 5 major parts  Collections from customers  Cash payments for purchases  Cash payments for operating expenses  Cash payments for capital expenditures  Cash Financing – borrowings, repayments and interest

50. 6-50 J. Keith Baker © 2015 Cash Payment Components  Cash payments  For inventory purchases  For operating expenses  Purchase long-term assets  Payment on loans  Payment to owners

51. 6-51 J. Keith Baker © 2015 Cash Budget Minimum Requirement Beginning cash balance + Cash receipts = Cash available - Cash payments (for inventory, operating expenses, purchase of long-term assets) = Ending balance before financing - Minimum balance = Excess (deficiency)

52. 6-52 J. Keith Baker © 2015 Cash Budget Financing Section Financing: +Borrow - Principal payments - Interest expense Total Effects of financing Ending Cash Balance

53. 6-53 J. Keith Baker © 2015J. Keith Baker © 2013 E 6-36: Continuation of Cash Budget

54. 6-54 J. Keith Baker © 2015J. Keith Baker © 2013 10-54 E 6-36: Continuation of Cash Budget

55. 6-55 J. Keith Baker © 2015J. Keith Baker © 2013 10-55 E 6-36: Continuation of Cash Budget

56. 6-56 J. Keith Baker © 2015 Other Budgeting Issues  Financial-planning software may be employed to conduct sensitivity (“what-if”) analysis to assist in the budgetary process.  Kaizen budgeting—incorporating continuous improvement factors in the budgeting process.  Activity-based budgeting—incorporating activity- based costing in the budgetary process.

57. 6-57 J. Keith Baker © 2015 Financial-planning models & sensitivity analysis:  Financial planning models may be employed to conduct sensitivity (“what-if”) analysis to assist in the budgetary process.  A “what-if” analysis or sensitivity analysis is a technique that examines how a result will change if the original predicted data or underlying assumption change.

58. 6-58 J. Keith Baker © 2015J. Keith Baker © 2013 Sensitivity Analysis Let’s Consider Hawaii Diving. What if some parameters in the budget model were to change? For example, what if the selling price is expected to be $230 instead of $240? What are expected revenues? 1,100 × $230 = $253,000 instead of $264,000

59. 6-59 J. Keith Baker © 2015J. Keith Baker © 2013 Sensitivity Analysis What if the materials cost is expected to increase to $2.50 per pound instead of $2.00. What is the cost of goods sold? 1,100 × $55 = $60,500 instead of $59,400 Why the increase? Because materials cost per unit become $5.00 instead of $4.00.

60. 6-60 J. Keith Baker © 2015 Sensitivity Analysis Sensitivity analysis is used to assist managers in planning and budgeting. Sensitivity analysis is a “what if” technique that illustrates the impact of changes from the predicted data. Two scenarios are being considered for Stylistic Furniture’s budget for 2015.

61. 6-61 J. Keith Baker © 2015J. Keith Baker © 2013 What is Kaizen? The Japanese use the term “kaizen” for continuous improvement. Kaizen budgeting is an approach that explicitly incorporates continuous improvement during the budget period into the budget numbers.

62. 6-62 J. Keith Baker © 2015J. Keith Baker © 2013 Kaizen Budgeting It was previously estimated that it should take 3 labor-hours for Hawaii Diving to manufacture its product. A kaizen budgeting approach would incorporate future improvements.

63. 6-63 J. Keith Baker © 2015J. Keith Baker © 2013 Kaizen Budgeting Budgeted Hours/Item January – March 2014 3.00 April – June 20142.95 July – September 20142.90 October – December 20142.85

64. 6-64 J. Keith Baker © 2015J. Keith Baker © 2013 Activity-Based Budgeting Activity-based costing reports and analyzes past and current costs. Activity-based budgeting (ABB) focuses on the budgeted cost of activities necessary to produce and sell products and services.

65. 6-65 J. Keith Baker © 2015J. Keith Baker © 2013 Activity-Based Budgeting Product A Product B Units produced:880200 Labor-hours per unit: 3 3 Budgeted setup-hours: 5 5 Total budgeted machine setup related cost is $25,920 per month.

66. 6-66 J. Keith Baker © 2015J. Keith Baker © 2013 Activity-Based Budgeting Total budgeted labor-hours are: Product A: 880 × 32,640 Product B: 200 × 3 600 Total3,240 What is the allocation rate per labor-hour? $25,920 ÷ 3,240 = $8.00

67. 6-67 J. Keith Baker © 2015J. Keith Baker © 2013 Activity-Based Budgeting Product A: $8.00 × 2,640=$21,120 Total cost allocated to each product line: Product B: $8.00 × 600=$ 4,800

68. 6-68 J. Keith Baker © 2015J. Keith Baker © 2013 Activity-Based Budgeting $25,920 budgeted machine setup cost ÷ 10 budgeted machine setup-hours = $2,592 allocation rate per machine setup-hour. Under ABB, the number of setups is the cost driver. How much machine setup related costs are allocated to each product line?

69. 6-69 J. Keith Baker © 2015J. Keith Baker © 2013 Activity-Based Budgeting Product A Product B $2,592 × 5$12,960 Setup-related cost per unit: Product A: $12,960 ÷ 880$14.73 Product B: $12,960 ÷ 200$64.80

70. 6-70 J. Keith Baker © 2015 Budgeting and the Organization: Responsibility Accounting  Responsibility center—a part, segment, or subunit of an organization whose manager is accountable for a specified set of activities.  Responsibility accounting—a system that measures the plans, budgets, actions, and actual results of each responsibility center.

71. 6-71 J. Keith Baker © 2015 Types of Responsibility Centers 1. Cost—accountable for costs only 2. Revenue—accountable for revenues only 3. Profit—accountable for revenues and costs 4. Investment—accountable for investments, revenues, and costs

72. 6-72 J. Keith Baker © 2015 Responsibility Accounting  Performance reports compare budgeted and actual amounts  Management by exception – management technique that focuses on important differences between budget and actual

73. 6-73 J. Keith Baker © 2015 Budgets and Feedback  Budgets offer feedback in the form of variances: actual results deviate from budgeted targets.  Variances provide managers with:  Early warning of problems  A basis for performance evaluation  A basis for strategy evaluation

74. 6-74 J. Keith Baker © 2015 Controllability  Controllability is the degree of influence that a manager has over costs, revenues, or related items for which he is being held responsible.  Responsibility accounting focuses on information sharing, not in laying blame on a particular manager.

75. 6-75 J. Keith Baker © 2015 Controllability  Responsibility accounting focuses on information and knowledge, not control.  A responsibility accounting system could exclude all uncontrollable costs from a manager’s performance report.  In practice, controllability is difficult to pinpoint.

76. 6-76 J. Keith Baker © 2015 Budgeting and Human Behavior  The budgeting process may be abused both by superiors and subordinates, leading to negative outcomes.  Superiors may dominate the budget process or hold subordinates accountable for events they have no control over.  Subordinates may build “budgetary slack” into their budgets.

77. 6-77 J. Keith Baker © 2015 Budgetary Slack  The practice of underestimating budgeted revenues, or overestimating budgeted expenses, in an effort to make the resulting budgeted goals (profits) more easily attainable.

78. J. Keith Baker © 2013 Exercise 6-19 Budgeting material purchases. The Howell Company has prepared a sales budget of 43,000 finished units for a three-month period. The company has an inventory of 11,000 units of finished goods on hand at December 31 and has a target finished goods inventory of 19,000 units at the end of the succeeding quarter. It takes 4 gallons of direct materials to make one unit of finished product. The company has an inventory of 66,000 gallons of direct materials at December 31 and has a target ending inventory of 56,000 gallons at the end of the succeeding quarter. How many gallons of direct materials should be purchased during the three months ending March 31?

79. 6-79 J. Keith Baker © 2015J. Keith Baker © 2013 Budgeting Materials Purchases Production Budget: Finished Goods (units) Budgeted sales43,000 Add target ending finished goods inventory19,000 Total requirements62,000 Deduct beginning finished goods inventory11,000 Units to be produced51,000 Direct Materials Purchases Budget: Direct Materials (in gallons) Direct materials needed for production (51,000  4)204,000 Add target ending direct materials inventory 56,000 Total requirements260,000 Deduct beginning direct materials inventory 66,000 Direct materials to be purchased194,000

80. 6-80 J. Keith Baker © 2015J. Keith Baker © 2013 Responsibility and controllability. Consider each of the following independent situations for Happy Tours. Happy Tours to schools and other groups. Happy Tours owns a fleet of 10 motor coaches and employs 12 drivers. 1 maintenance technician, 3 sales representatives and an office manager. Happy Tours pays for all fuel and maintenance on the coaches. Drivers are paid 50¢ per mile while in transit, plus $15 an hours while idle (TIME SPENT WAITING WHILCE TOUR GROUPS ARE VISITING THEIR DESTINATIONS. The maintenance Technician and office manager are both full-time salaried employees. The sales representatives work on straight commission. Problem 6-28

81. 6-81 J. Keith Baker © 2015J. Keith Baker © 2013 1. The office manager has the responsibility to follow company guidelines and write contracts herself for customers who call her directly. Diverting potential customers to the sales representative costs the company a sales commission that would not have otherwise been paid. If satisfaction surveys are sent to customers asking about their first contact with the company, this may be enough to prevent the office manager from breaking the rules. 2. Each driver is responsible for keeping an accurate accounting of his or her time. Because the drivers are paid for mileage while driving and an hourly rate while in idle, there is an incentive to report less travel time and more idle time. The cost could be controlled by using global positioning systems (GPS) to track the movement and location of the motor coaches. Problem 6-28

82. 6-82 J. Keith Baker © 2015 3. The drivers are responsible for driving the motor coaches at fuel- efficient speeds on the highway. The maintenance technician is responsible for maintaining the vehicles to improve efficiency. An increase in fuel consumption would be difficult to pin on either employee because either could be responsible. Further, there is no incentive for the drivers to drive slower, as they are paid by the mile. Again, global positioning systems (GPS) could be used to track the movement of the vehicles. Some kind of bonus could be offered to the technician for improvements in fuel efficiency. 4. The maintenance technician is clearly responsible for completing all of the preventative maintenance. If he cannot complete the tasks during busy months, the company should consider outsourcing some of the more routine maintenance jobs. Requiring the technician to work significant overtime will likely decrease his efficiency. Ignoring routine maintenance will end up costing the company more money in fuel and repair costs. Problem 6-28

83. 6-83 J. Keith Baker © 2015 5. Haslett has designed the stretch target system correctly. Taking advantage of loss aversion, Haslett has set a stretch target of 50 contracts rewarding the representative with a 12 percent commission (assuming paying this amount of commission is profitable). If the target is not met, the commission decreases to 8 percent. This will motivate the representatives to achieve 50 contracts. In establishing “stretch targets,” Haslett should be sure that there are sufficient potential contracts to allow all three sales representatives to achieve the higher target. Otherwise, the stretch target may cause friction among the representatives. One or more of representatives may decide that the 8 percent commission is not sufficient incentive to stay with the company, and may leave to work for a competitor, resulting in overall reduced sales. Problem 6-28

84. 6-84 J. Keith Baker © 2015J. Keith Baker © 2013 End of Chapter 6