Question 11.RQ.2.12: The distribution manager is paid a bonus of 5% of any saving...
The distribution manager is paid a bonus of 5% of any savings he achieves against a flexible budget cost allowance for distribution costs each period.
The budget cost allowances for distribution costs for the previous two periods were as follows.
Tonnes distributed Budget cost allowance
£
11,200 118,400
16,100 152,700
In the latest period, the number of tonnes distributed was 13,200 and the distribution cost incurred was £130,900.
The bonus payable to the distribution manager for the period is £ \boxed{ \ \ \ \ \ \ \ \ \ \ \ \ \ }
The bonus payable to the distribution manager for the period is £75.
Tonnes Budget cost
distributed allowance
£
11,200 118,400
16,100 152,700
4,900 34,300
Variable distribution cost per tonne delivered = £34,300/4,900 = £7
Fixed distribution cost = £118,400 – (11,200 × £7) = £40,000
Budget cost allowance for 13,200 tonnes delivered = £40,000 + (13,200 × £7)
= £132,400
Savings against budget cost allowance = £132,400 – £130,900
= 1,500
Bonus payable =5% × £1,500 = £75