Vinny,Inc.has an incentive compensation plan under which the sales manager receives a bonus equal to 10 percent of the company's income after deductions for bonus and income taxes.Income before bonus and income taxes is $400,000.The effective income tax rate is 30 percent.How much is the bonus (rounded to the nearest dollar)?

Question

Quizplus · Accepted Answer

The bonus is calculated on the income after deducting the bonus and income taxes. Let's denote the bonus as B. The income before bonus and taxes is $400,000. The effective tax rate is 30%, so the tax is applied on the income after deducting the bonus. The equation to calculate the bonus is: B = 10% * ($400,000 - B - 30% * ($400,000 - B)). Solving this equation gives B = $26,168 (rounded to the nearest dollar).

Vinny,IncHas an Incentive Compensation Plan Under Which the Sales Manager