As Part of the Company's Compensation Plan,a Chief Executive Officer

question 41

Multiple Choice

As part of the company's compensation plan,a chief executive officer (CEO) is paid 1% of net profit if net profit exceeds $2,000,000 but no more than $40,000 in a given year.It is estimated that net profit for the year will exceed $4,500,000.Under PAT the CEO will likely adopt which accounting policy:

• A) Decrease reported profit as much as he can.
• B) Decrease reported profit to $2,000,000.
• C) Increase reported profit as much as he can.
• D) Increase reported profit up to $4,000,000.
• E) Make no change to the initial calculation

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Definitions:

Standard Deviation

An indicator of the extent to which a set of numbers spreads out, showing the deviation of the values from their average.

Normally Distributed

Describes a distribution of data where most observations cluster around the mean, forming a bell-shaped curve.

Standard Deviation

Standard deviation is a statistic that measures the dispersion or variability of a dataset relative to its mean.

Standard Deviation

A means to assess the degree of variability or scattering in a set of numerical values.