Cunningham, a branch manager, is allowed a bonus of 10% of income after bonus and tax. If the tax rate is 30% and income before bonus and tax is $200,000, what is Mr. Cunningham's bonus?
A) $13,084
B) $14,000
C) $14,433
D) $20,000

Question

Quizplus · Accepted Answer

The income after bonus and tax can be represented as I, where I = Income before bonus and tax - Tax - Bonus. Given that the tax rate is 30%, and the bonus is 10% of the income after bonus and tax, we can set up the equation: I = $200,000 - 0.3($200,000) - 0.1I. Solving for I gives us I = $126,000. Therefore, the bonus, which is 10% of I, equals $12,600. However, due to a calculation mistake in the final step, the correct bonus calculation should follow from correctly solving the equation for I and then finding 10% of that. The correct approach involves setting up the equation with the right understanding of the bonus being 10% of the income after tax and bonus, not directly from the initial income. The mistake in the final calculation led to an incorrect bonus amount being provided. The correct calculation should find the bonus as a function of the income after taxes and itself, leading to the correct answer through solving the equation: $200,000 - 30% of $200,000 = $140,000 before the bonus. Let B be the bonus, then $140,000 - B = 10B, leading to the correct calculation and the correct bonus amount.

Cunningham, a Branch Manager, Is Allowed a Bonus of 10