Question

Under a profit-sharing plan, Entity A agrees to pay its employees 5% of its annual profit.

The bonus shall be divided among the employees currently employed as at year-end. Relevant information follows:
Profit for the year P8,000,000
Employees at the beginning of the year 8
Average employees during the year 7
Employees at the end of the year 6
If you are one of the employees of Entity A, how much bonus do you expect to receive? a. 66,667
b. 57,143
c. 50,000
d. 0

Answer 1

The correct answer is option a. $66,667.

Step-by-step explanation:

To calculate the bonus you would receive under the profit-sharing plan, you need to determine the total profit and divide it among the employees. The profit for the year is $8,000,000 and there were 8 employees at the beginning of the year, 7 on average during the year, and 6 at the end of the year.

To calculate the bonus, you need to multiply the profit by 5% and then divide by the total number of employees:

Bonus = ($8,000,000 * 5%) / (8 + 7 + 6) = $66,667

Therefore, the correct answer is option a. $66,667.