Portland 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. 30% of income before taxes in excess of the target profit level, which is 30% of net assets, or

2 $7 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.

Requirement a. If the company earned $55 million of earnings before taxes and had net assets of $175 million, what would be the amount available for distribution from the profit-sharing pool? (Abbreviation used: EBT = Earnings before taxes.) Begin by determining the profit-sharing pool formula. The company's profit-sharing pool is the ______ (Higher or Lower) of the following two items:

1. a. 30% x (EBT - net assts)

b. 30% x (EBT - (30% x Net assets))

c. 30% x (30% x (EBT - net assets))

d. 30% x 30% x net assets

e. 30% x (EBT - net assets)

f. EBT - (30% x Net assets)

or

2. a. $7 M

b. $52.5 M

c. $40 M

d. $55 M

e. $175 M

Compute the amount for the profit-sharing pool item that uses the target profit level as a component of its formula. (Round your answer to the nearest whole dollar.)