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Aero Company has implemented a gain sharing compensation plan for its production employees. The plan...

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Accounting

Aero Company has implemented a gain sharing compensation plan for its production employees. The plan is a Scanlon plan and the base period payroll costs are$10,000. The value of production in the base period was $100,000. The plan calls for labor savings to be added to, or excess labor costs to be deducted from, the bonus pool each quarter. The payroll costs and value of production in each quarter of the current year were:

Quarter

Payroll

Production

1

$ 9,000

$110,000

2

10,000

100,000

3

11,000

120,000

4

12,000

130,000

Total

$42,000

$460,000

The base ratio is:

A.

0.105.

B.

0.09.

C.

0.10.

D.

None of the above is correct.

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