Terry Pineno, New-Accounts Manager at East Bank of Clarion, Has

question 66

Essay

Terry Pineno, new-accounts manager at East Bank of Clarion, has been asked to project how many new accounts she will open during 20x2. The local economy has been growing, and the bank has experienced a 10% increase in the number of new accounts over each of the past five years. In 20x1, the bank had 10,000 accounts.
Pineno is paid a salary, plus a bonus of $20 for every new account above the budgeted amount. Thus, if the annual budget calls for 1,000 new accounts, and 1,080 new accounts are obtained, her bonus will be $1,600 (80 × $20).
Pineno believes that the local economy will continue to grow at the same rate in 20x2 as it has in recent years. She decided to submit a projection of 700 new accounts for 20x2.
Required:
Your consulting firm has been hired by the bank president to make recommendations for improving the bank's operation. Write a memorandum to the president defining and explaining the negative consequences of budgetary slack. Also discuss the bank's bonus system for the new-accounts manager and how the bonus program tends to encourage budgetary slack.

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Definitions:

Sadness

A state of unhappiness or sorrow, typically resulting from a specific cause or event.

Use A Gun

The act of employing a firearm, either for defensive purposes, recreational shooting, or in a criminal context.

Commit Suicide

Purposefully ending one's own life.

One-Third

A fraction that represents one part of three equal parts of a whole.