On 1 July 2021, Norman Pty Ltd Granted 100 Options

question 8

Multiple Choice

On 1 July 2021, Norman Pty Ltd granted 100 options to each of its 50 employees. The options are conditional on the employees remaining with the company for the 3 year vesting period. The options have a fair value of $5.00 at vesting date. In addition, the shares will vest as follows: On 30 June 2022 if the company's earnings have increased by more than 12%.
On 30 June 2023 if the company's earnings have increased by more than 10% averaged across the 2 year period.
On 30 June 2024 if the company's earnings have increased by more than 8% averaged across the 3 year period.
At 30 June 2022 Norman Pty Ltd's earnings have increased by 11% and 2 employees have left.
The company expects that earnings will continue to increase at a similar rate during the year to 30 June 2023 and that the shares will vest at that time. It also expects that a further 3 employees will leave during the year. The remuneration expense for the year ended 30 June 2022 for Norman Pty Ltd is:

• A) $12 500
• B) $25 000
• C) $11 250
• D) $22 500

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Definitions:

Apportion

To divide and allocate proportions or shares of a total amount among different entities based on a set criteria or formula.

Total Cost

The sum of all expenses incurred in producing a product or delivering a service, including direct costs like materials and labor, and indirect costs such as overhead.

Contribution Margin

A department’s net profit, used to cover indirect expenses.

Gross Profit

The difference between sales revenue and the cost of goods sold (COGS), indicating the basic profitability of a company's core activities.