If a firm manager has a base salary of $100,000 and also receive 5% of all profits, what percentage of his/her final income will be from the profit sharing plan given profit equals $1,500,000?

Question

Quizplus · Accepted Answer

The manager's profit share would be calculated by multiplying the profit ($1,500,000) by the percentage they receive (5% = 0.05).

Profit share = $1,500,000 x 0.05 = $75,000

Their total income would be the sum of their base salary and profit share:

Total income = $100,000 + $75,000 = $175,000

To determine the percentage of their final income that comes from profit sharing:

Profit share percentage = (profit share / total income) x 100%

Profit share percentage = ($75,000 / $175,000) x 100% ≈ 42.9%

Therefore, the closest answer choice is C, 43%.

If a Firm Manager Has a Base Salary of $100,000