Calculating Profit Sharing Pay Awards

In your new role as compensation analyst, you have been asked to estimate the dollar amount of the profit-sharing pool based on three approaches as well as the allocation of profit-sharing awards to eligible employees. The company's profits equal $35 million. You are considering the following three formulas for determining the total profit-sharing pool.

First-Dollar of Profits:The company agrees to share 3.5 percent of all profits up to $12 million.

Graduated First-Dollar-of-Profits: The company agrees to share 3.5 percent of all profits up to $15 million, and 5.5 percent of all profits up to $40 million.

Profitability Threshold Formula: The company will share 3.5 percent of the profits above $10 million up to $17 million. There are 260 employees whose total annual base pay equals $2,100,000. Part 2 The total profit-sharing pool for:

(Round your answers to the nearest hundredths place.)

(a) First-dollar of profits is

(b) Graduated first-dollar of profits is

(c) Profitability threshold formula is

Part 3

Based on the equal payments formula, the average profit-sharing award per employee (based on the total profit-sharing pools) for:

(Round your answers to the nearest hundredths place.)

(a) First-dollar of profits is

per employee

(b) Graduated first-dollar-of-profits is

per employee

(c) Profitability threshold formula is

per employee