Question

You are the CEO of a corporation that makes computer hard drives. The company made $50 million dollars in annual profit this year, after struggling for the 5 previous years. About 6,000 people are working for your company and about 80% of them are directly associated with the manufacturing plant. Workers at the plant have not received a salary raise for the past 5 years, and the workers union is demanding a salary raise this year. The company has an annual payroll of about $500 million dollars, with about 70% of it for the workers in the plant. Factory managers are asking for $25 million dollars to upgrade the equipment and improve the efficiency of the plant. White-collar workers in the head office claim that it is their strategy that turned the factory around and put it on the path to profit. Due to this reason, they think they deserve to get a big bonus. How do you allocate the profits to meet all these demands? Justify your decision.

Answer 1

When it comes to resource allocation, it's not a one sentence answer. The explanation for how to go about this is given below. But first, lets look at what Profit Allocation means.

What is profit allocation?

This simply means the process of distributing profit to various areas of the business such that all parts are (human and non-human  components) are satisfied and operating at equilibrium.

So how does one allocate resources?

There are five steps to aligning your budget and resource demands when planning for support resource allocation.

• Recognize your financial flow.
• Outline your present staffing and resource requirements.
• Examine your present budget.
• Create firm growth objectives.
• Align your budget with your objectives.

Learn more about profit allocation at;
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