Jason Is a Stockbroker Who Is on Variable Compensation

question 72

Essay

Jason is a stockbroker who is on variable compensation.In good years he receives a healthy bonus that might triple his base salary.During these times he is accustomed to a lavish lifestyle,driving expensive cars and taking exotic vacations.He knows it is important to save for retirement but he makes RRSP contributions only in years in which he receives good bonus cheques.In poor years he will receive only a base salary.During these poor years he finds himself scrambling to pay off debts and meet monthly expenses.
He always seems to have more unexpected expenses during these times,too.He always has at least $1000 cash in his wallet and tries to avoid the use of credit cards as much as possible.Jason is funding all short-term goals with current earnings and hasn't set any mid- or long-term goals.
He is frustrated by his wildly fluctuating income and his constant concern about his potential earnings at the beginning of each year.How can you assist Jason?

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Definitions:

Specific Identification Method

The specific identification method is an approach to inventory valuation that tracks the cost of individual items or groups of similar items.

Inventory Costing

The method of accounting that assigns costs to inventory, typically involving the calculation of costs of goods sold and ending inventory values.

High-Unit Cost

The condition of having a high cost per unit of product, often due to expensive inputs or inefficient production.

FIFO

First-In, First-Out, an inventory valuation method where goods purchased or manufactured first are sold or used first.