Suppose that you work at the Peacock Blue store for 40 hours over five days at a rate of $9.25/hour. You then quit your job. Deductions are FICA (7.65%), federal withholding (12%), and state withholding (8%). Your expenses are transportation at $5.25/day, lunch at $3.85/day, and black slacks required for work at $19.95. How much is your discretionary income for the week?
I come out with $201.84 but the answers are:
• $324.50
• $304.55
• $222.19
• $202.24
202.25
40 hours * $9.25 = $370
$370 * 4 weeks = $1480
then, calculate and then subtract the involuntary deductions (1480*.0765) + (1480*.12) + (1480*.08) = $409.22
$1480 - $409.22 = $1070.78 (your net income for a month)
to get the net income of one week, divide by 4
$1070.78/4 = 267.69
To calculate your discretionary income for the week, we need to first determine your gross income, which is the total amount you earned before any deductions.
Your gross income can be calculated by multiplying your hourly rate ($9.25/hour) by the number of hours you worked (40 hours):
Gross Income = Hourly Rate × Hours Worked
Gross Income = $9.25/hour × 40 hours
Gross Income = $370
Next, we need to calculate the total amount of deductions taken from your gross income. In this case, you have three deductions: FICA, federal withholding, and state withholding.
Let's start with FICA, which is calculated as a percentage of your gross income. FICA is 7.65% of your gross income:
FICA = Gross Income × 0.0765
FICA = $370 × 0.0765
FICA = $28.28
Next, we calculate federal withholding, which is also a percentage of your gross income. Federal withholding is 12%:
Federal Withholding = Gross Income × 0.12
Federal Withholding = $370 × 0.12
Federal Withholding = $44.40
Finally, we calculate state withholding, which is again a percentage of your gross income. State withholding is 8%:
State Withholding = Gross Income × 0.08
State Withholding = $370 × 0.08
State Withholding = $29.60
Now let's calculate your total deductions by adding up FICA, federal withholding, and state withholding:
Total Deductions = FICA + Federal Withholding + State Withholding
Total Deductions = $28.28 + $44.40 + $29.60
Total Deductions = $102.28
Subtracting the total deductions from your gross income will give us your net income:
Net Income = Gross Income - Total Deductions
Net Income = $370 - $102.28
Net Income = $267.72
Next, calculate your total expenses by adding up your transportation, lunch, and cost of black slacks:
Total Expenses = Transportation + Lunch + Black Slacks
Total Expenses = $5.25/day × 5 days + $3.85/day × 5 days + $19.95
Total Expenses = $26.25 + $19.25 + $19.95
Total Expenses = $65.45
Finally, subtract the total expenses from your net income to obtain your discretionary income:
Discretionary Income = Net Income - Total Expenses
Discretionary Income = $267.72 - $65.45
Discretionary Income = $202.27
From the given answer choices, the most accurate answer is $202.24, as rounding to the nearest cent, your discretionary income is $202.27.