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# Variable Pay

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What is Variable Pay and 5 types of compensation that could be included in a Variable Pay plan?

What specific type of variable pay would you develop for each department of the Riordan organization and why would you choose that type of pay

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What is Variable Pay and 5 types of compensation that could be included in a Variable Pay plan?

As companies have become so concerned with equating employee's pay with their performance while making themselves competitive in the job market, they have realized the value of alternative compensation that can accomplish these objectives in one way or another. Employees who have worked harder than the others and have increased efficiency are rewarded with a variable pay. With this technique, other employees are also motivated to do the same so that they can also share in the additional pay. Variable pay is given to the individual worker or a team of workers for extraordinary efforts rendered for the company (Zall, M., 2001). Variable pay is an innovation designed to bring the salaries of the employees parallel with the companies' performance in the market. It ...

#### Solution Summary

The solution defines Variable Pay and the five types of compensation that can be included in a Variable Pay Plan. It also suggests a specific type of variable pay for the departments of Riordan organization. References included.

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## Binomial and Normal Variable

1. A manufacturer of window frames knows from long experience that 5 percent of the production

will have some type of minor defect that will require an adjustment. What is the probability that in a sample of 20 window frames:

b. At least one will need adjustment?

More than two will need adjustment?
2. A study of Furniture Wholesales, Inc. regarding the payment of invoices reveals the time from billing until payment is received follows the normal distribution. The mean time until payment is received is 20 days and the standard deviation is 5 days.

a. What percent of the invoices are paid within 15 days of receipt?

b. What percent of the invoices are paid in more than 28 days?

c. What percent of the invoices are paid in more than 15 days but less than 28 days?

d. The management of Furniture Wholesales wants to encourage their customers to pay their monthly invoices as soon as possible. Therefore, it announced that a 2 percent reduction in price would be in effect for customers who pay within 7 working days of the receipt of the invoice. What percent of customers will earn this discount?

3. The annual commissions earned by sales representatives of Machine Products Inc., a manufacturer of light machinery, follow the normal distribution. The mean yearly amount earned is \$40,000 and the standard deviation is \$5,000.

a. What percent of the sales representatives earn more than \$42,000 per year?

b. What percent of the sales representatives earn between \$32,000 and \$42,000?

c. What percent of the sales representatives earn between \$32,000 and \$35,000?

d. The sales manager wants to award the sales representatives who earn the largest commissions a bonus of \$1,000. He can award a bonus to 20 percent of the representatives. What is the cutoff point between those who earn a bonus and those who do not?

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