Profit$-$sharing plan at Hoechst Celanese

shown here:

target payment of $4\%.$ For example, if earnings from operations were $$228$ million, the profit$-$sharing percentage would be $2\mathrm{.}50\%$ :

Profit$-$sharing percentage $=1\%+\{3\%[\frac{\text{\$}228-\text{\$}200}{\text{\$}256-\text{\$}200}]\}=2\mathrm{.}50\%($rounded to the nearest two decimals$)$

Profit$-$sharing pool $=2\mathrm{.}50\%$$$228,000,000=$$$5,700,000$

would be $5\mathrm{.}29\%,$ and the profit$-$sharing pool would be $$14\mathrm{.}81$ million:

Profit$-$sharing percentage $=4\%+\{3\%[\frac{\text{\$}280-\text{\$}256}{\text{\$}312-\text{\$}256}]\}=5\mathrm{.}29\%($rounded to the nearest two decimals$)$

Profit$-$sharing pool $=5\mathrm{.}29\%$$$280,000,000=$$$14,812,000$

If earnings from operations equal or exceed the stretch target level, the profit$-$sharing pool would be $$21\mathrm{.}8$ million:

Profit$-$sharing pool $=7\%$$$312,000,000=$$$21,840,000$

$($a$)$ The EFO for a given year was $$266$ million. Compute the size of the profit$-$sharing pool.

$*$Note: Round the profit$-$sharing percentage to two decimal points $($i$.$e$.$ show $14\mathrm{.}445\%$ as $14\mathrm{.}45\%)$ before further calculation.

Profit$-$sharing percentage $=$

Profit$-$sharing pool $=$$

Be able to discuss the desirable and undesirable features of the Hoechst Celanese performance sharing plan.

$($b$)$ In the following year, the performance sharing plan parameters were:

Given the same level of EFO of $$266,$ what is the size of the profit$-$sharing pool using these updated parameters.

Be able to discuss the implications of raising the parameters from one year to the next.

Profit$-$sharing pool $=$$