The Manager of Yates Company Is Given a Bonus Based

question 235

Multiple Choice

The manager of Yates Company is given a bonus based on income before income taxes. Net income, after taxes, is $10,500 for FIFO and $9,450 for average-cost. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of average-cost?

• A) $375
• B) $563
• C) $300
• D) $1,050

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Definitions:

Projections

Forward-looking estimates or predictions about a company's financial performance, often involving revenue, expenses, and profit forecasts.

Asset Management

The systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner.

Equity Capital

Funds raised by a company through the sale of shares in return for ownership interest, without obligation to repay the investment.

Issuing Bonds

The act of a corporation or government raising capital by borrowing from investors through the sale of bond securities.