If a firm manager has a base salary of $100,000 and also receives 5 percent of all profits,what percentage of his/her final income will be from a profit-sharing plan when profit equals $1,500,000?
A) 51 percent
B) 27 percent
C) 43 percent
D) 48 percent

Question

Quizplus · Accepted Answer

Total income = base salary + 5% of profit
= $100,000 + (5/100) * $1,500,000
= $175,000
Profit-sharing component = (5/100) * $1,500,000/$175,000 * 100
= 42.86%
Therefore, the percentage of the final income from a profit-sharing plan would be 43 percent, which is closest to option C.

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