27. Last year, X Corporation had sales of $500,000 and total expenses of $300,000. A manager is entitled to a sales commission of 10% of net profit. What amount of commission is recognized at year-end?
Answer: B
The amount of commission recognized at year-end is $20,000.
The net profit for X Corporation is calculated as sales minus expenses, which is $500,000 - $300,000 = $200,000. The manager's commission, being 10% of the net profit, amounts to $20,000.
A) $10,000
This option is incorrect because it represents only 5% of the net profit. The commission is specifically calculated as 10% of the net profit, which is not accurately reflected in this choice.
B) $20,000
This option is correct as it accurately reflects 10% of the net profit. With a net profit of $200,000, the commission is correctly calculated as $200,000 * 10% = $20,000.
C) $30,000
This option is incorrect because it suggests a commission that exceeds the calculated amount for 10% of the net profit. The correct commission is based on a net profit of $200,000, making this option invalid.
D) $50,000
This option is also incorrect. It implies a commission based on a net profit of $500,000, which does not apply here as the commission is calculated from net profit, not total sales.
Conclusion
The correct answer is $20,000, as it accurately reflects 10% of the calculated net profit of $200,000. All other options misrepresent the commission calculation by either underestimating or overestimating the percentage of the net profit. Therefore, option B is the only correct choice based on the provided financial data.