Jump has a network of sports clubs which is managed by local managers reporting to the main board. The local managers have a lot of autonomy and are able to vary employment contracts with staff and offer discounts for membership fees and personal training sessions. They also control their own maintenance budget but do not have control over large amounts of capital expenditure. A local manager’s performance and bonus is assessed relative to three targets. For every one of these three targets that is reached in an individual quarter, $400 is added to the manager’s bonus, which is paid at the end of the year. The maximum bonus per year is therefore based on 12 targets (three targets in each of the four quarters of the year). Accordingly the maximum bonus that could be earned is 12 x $400 = $4,800, which represents 40% of the basic salary of a local manager. Jump has a 31 March year end. The performance data for one of the sports clubs for the last four quarters is as follows Agreed targets are: 1. Staff must be on time over 95% of the time (no penalty is made when staff are absent from work) 2. On average 60% of members must use the clubs’ facilities regularly by visiting at least 12 times per quarter 3. On average 10% of members must book a personal training session each quarter Required: (a) Calculate the amount of bonus that the manager should expect to be paid for the latest fi nancial year. (6 marks) (b) Discuss to what extent the targets set are controllable by the local manager (you are required to make a case for both sides of the argument). (9 marks) (c) Describe two methods as to how a manager with access to the accounting and other records could unethically manipulate the situation so as to gain a greater bonus. (5 marks)