Refer to P5.7. Assume Grauberger changes the bonus rate to 10 percent.

Required:

A. If Grauberger’s bonus base is income before bonus or taxes, what is the expected bonus amount?B. If Grauberger’s bonus base is income before taxes (after bonus), what is the expected bonus amount?C. If Grauberger’s bonus base is net income (after taxes, after bonus), what is the expected bonus amount?D. What are the expected cash outflows for bonus and taxes for each of the above alternatives?E. What is the expected net income for each alternative?

Data from P5.7

Grauberger Company has provided the following budgeting information for you to determine its expected bonus payments and cash outflows. Grauberger’s bonus rate is 15 percent and its tax rate is 30 percent.

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Sales Less cost of goods sold Gross margin Less operating costs $6,000,000 3,500,000 $2,500,000 1,000,000 Expected income before bonus or taxes $1,500,000