The manager of Brick Company is given a bonus based on income before income taxes. Net income, after taxes, is $11,200 for FIFO and $9,800 for LIFO. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of LIFO?
A) $84
B) $2,800
C) $400
D) $420

Question

Quizplus · Accepted Answer

The difference in net income before taxes between FIFO and LIFO is $2,000 ($11,200 - $9,800). The bonus is calculated on income before taxes, so the bonus difference is 20% of $2,000, which is $400.

The Manager of Brick Company Is Given a Bonus Based