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Frieza Company enjoys profitable operations for its past ten years of existence. The Company president proposed to the Board of Directors as incentive compensation plan

Frieza Company enjoys profitable operations for its past ten years of existence. The Company president proposed to the Board of Directors as incentive compensation plan where the general manager would be entitled to a year-end bonus under the following alternative schemes:

Alternative 1:

8% bonus based on profit before bonus and income tax in excess of P5,000,000.

Alternative 2:

5% bonus based on profit after bonus and income tax.

Alternative 3:

3% bonus based on profit after bonus but before income tax.

Frieza Companys profit before bonus and income tax for the year ended December 31, 2019 is P8,000,000. Assume an income tax rate of 30%.

  • How much is the general managers bonus for 2019 under Alternative 1, 2 ,3 ?

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