Reference no: EM132951896

Question - Vitamin Z, a pharmaceutical manufacturer, has used a profit-sharing plan, the Vitamin Z Performance Sharing Plan, to motivate employees. To operationalize the plan, the Vitamin Z executive committee set a target earnings from operations (EFO). This target was based on the company's business plans and the economy's expected performance. The performance sharing plan also used two other critical values: the earnings from operations threshold amount and the earnings from operations stretch target. The targets for 2010 are shown here.

Earnings from operations:

Threshold EFO -- $270M

Target EFO -- $340M

Stretch EFO -- $390

The plan operates as follows. If earnings from operations fall below the threshold value, there is no profit sharing. If earnings from operations lie between the threshold amount and the target, the profit-sharing percentage is prorated between the threshold award of 4% and the target payment of 6%.

If earnings from operations are between the target and the stretch target, the profit-sharing percentage is prorated between the target payment of 6% and the stretch-sharing payment of 8%.

The EFO for 2010 was $ 365 million. Compute the size of the? profit-sh aring pool.

A. $21,900,000

B. $25,550,000

C. $27,443,936

D. $26,158,455