Janet Is the CEO for Silver, Inc

question 35

Essay

Janet is the CEO for Silver, Inc., a closely held corporation. Her total compensation for 2018 is $5 million. Of this amount, $2 million is a salary and $3 million is a bonus. The bonus was calculated as 5% of Silver's net income before the bonus and before taxes ($60 million × 5% = $3 million). The bonus provision has been in effect since Janet became CEO five years ago and is related to Silver's performance. It is approved annually by the entire board of directors (1 of the 5 directors is an outside director) of Silver. How much of Janet's compensation can Silver deduct for 2018?

---

Definitions:

Differential Prices

The practice of charging different prices for the same product or service to various customers based on market factors.

Fixed Cost

Expenses that do not change with the level of output or production, such as rent or salaries.

Aggregating Lots

The process of combining smaller batches of goods into larger lots to optimize production and distribution efficiency.

Multiple Products

Refers to an array of different items or goods that a business manufactures or sells.