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19-34 Compensation linked with profitability, waiting time, and quality measures.Seashore Healthcare operates two medical groups, one
Complete the following questions: ( I have also included the questions in an attachment in case it does not come out properly)
19-34 Compensation linked with profitability, waiting time, and quality measures.Seashore Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semiannual bonus plan for each medical group’s president has three components:a.Profitability performance. Add 1.50% of operating income.
b.Average patient waiting time. Add $30,000 if the average waiting time for a patient to see a doctor after the scheduled appointment time is less than 15 minutes. If average patient waiting time is more than 15 minutes, add nothing.
c.Patient satisfaction performance. Deduct $35,000 if patient satisfaction (measured using a survey asking patients about their satisfaction with their doctor and their overall satisfaction with Seashore Healthcare) falls below 65 on a scale from 0 (lowest) to 100 (highest). No additional bonus is awarded for satisfaction scores of 65 or more.
Semiannual data for 2013 for the Philadelphia and Baltimore groups are as follows:
Average waiting time
Average waiting time
Required1.Compute the bonuses paid in each half year of 2013 to the Philadelphia and Baltimore medical group presidents.
2.Discuss the validity of the components of the bonus plan as measures of profitability, waiting time performance, and patient satisfaction. Suggest one shortcoming of each measure and how it might be overcome (by redesign of the plan or by another measure).
3.Why do you think Seashore Healthcare includes measures of both operating income and waiting time in its bonus plan for group presidents? Give one example of what might happen if waiting time was dropped as a performance measure.
19-35 Ethics and quality. Weston Corporation manufactures auto parts for two leading Japanese automakers. Nancy Evans is the management accountant for one of Weston’s largest manufacturing plants. The plant’s general manager, Chris Sheldon, has just returned from a meeting at corporate headquarters where quality expectations were outlined for 2014. Chris calls Nancy into his office to relay the corporate quality objective that total quality costs will not exceed 10% of total revenues by plant under any circumstances. Chris asks Nancy to provide him with a list of options for meeting corporate headquarters’ quality objective. The plant’s initial budgeted revenues and quality costs for 2014 are as follows:Revenue