Profit Sharing Knight Medical Devices Makes Devices and Equipment That

Essay

Profit sharing Knight Medical Devices makes devices and equipment that it sells to hospitals.The organization has a profit-sharing plan that is worded as follows:
The company will make available a profit-sharing pool that will be the lower of the following two items:
1.40% of income before taxes in excess of the target profit level,which is 18% of net assets,or
2.$14 million.
The individual employee is paid a share of the profit-sharing pool equal to the ratio of that employee's salary to the total salary paid to all employees.
Required
(a) If the company earned $90 million of earnings before taxes and had net assets of $200 million,what would be the amount available for distribution from the profit-sharing pool?
(b) Suppose that Bob Knight's salary was $136,000 and that total salaries paid in the company were $50 million.What would Bob's profit share be?