Asked by Adrian Lukmanto on May 16, 2024
Verified
ABC Ltd.generated one million Canadian dollars in profits this year.ABC Ltd.decides to place 200,000 Canadian dollars (20 percent of pre-tax profits) in a bonus pool.In previous years,this figure has ranged from zero to 50 percent of pre-tax profits.What type of formula is ABC Ltd.using to determine contributions into the pool?
A) fixed percentage
B) fixed threshold
C) discretionary
D) percentage approach
Pre-Tax Profits
The amount of earnings of a company before the deduction of taxes, serving as a key indicator of financial health and operational efficiency.
Bonus Pool
A fund allocated for bonuses, typically based on company performance, and distributed to employees based on predetermined criteria.
Fixed Percentage
A specified, constant proportion or rate that does not change with variation in base quantities, often used in financial contexts like interests or commissions.
- Comprehend the principles of profit-sharing schemes and their capacity to motivate.
Verified Answer
AM
Anjulie McFarlandMay 21, 2024
Final Answer :
C
Explanation :
ABC Ltd. is using a discretionary formula to determine contributions into the bonus pool as the percentage varies from year to year depending on the company's performance, indicating the use of management's discretion.
Learning Objectives
- Comprehend the principles of profit-sharing schemes and their capacity to motivate.