Answer to Question #269146 in Microeconomics for Raman

Question

If a firm manager has a base salary of $100,000 and also receives 6 percent of all profits, what percentage of his/her final income will be from a profit-sharing plan when profit equals $1,500,000?

Answer 1

Basic Salary= $100,000.

Extra Earnings = 6% of $1,500,000.

$=0.06\times 1,500,000=90,000.$

Final Income$=100,000+90,000$

$=190,000$

The percentage of final income from the profit- sharing plan:

$=\frac{190,000}{1,500,000}\times100=12.67$%