Sally Nuzum recently took over the presidency of J & J Products. The firm sells a single product for $30 per unit. Its cost function has been estimated as $200,000 per year plus $10 per unit. J & J Products is subject to a combined provincial and federal income tax rate of 35%. Ms. Nuzum has been offered a bonus equal to 10% of the fi rm’s net income after tax. Sally has her eyes on a new car that will cost $36,000. Her personal tax rate will average 30%.

REQUIRED

A. Determine the amount of bonus required so that Sally has $36,000 after paying her taxes on the bonus.
B. Determine how much after-tax income J & J will need for Sally to receive the bonus calculated in Part A.
C. Solve for the number of units sold for Sally to get her bonus.
D. In what ways might the bonus infl uence Sally’s behaviour as president of J & J?