Question

Roark Co., which has a taxable payroll of $400,000, is subject to FUTA tax of 6.2% and a state contribution rate of 5.4%. However, because of stable employment experience, the company's state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Roark Co.?

a. $46,800
b. $32,800
c. $16,000
d. $11,200

Answer 1

The total amount of federal and state unemployment tax for Roark Co. is $32,800.

Step-by-step explanation:

The total amount of federal and state unemployment tax for Roark Co. can be calculated as follows:

1. Calculate the federal unemployment tax (FUTA tax):
2. FUTA tax rate = 6.2%
3. FUTA taxable payroll = $400,000
4. FUTA tax = FUTA tax rate * FUTA taxable payroll = 6.2% * $400,000
5. Calculate the state unemployment tax:
6. State contribution rate = 5.4% (before reduction)
7. Reduced state rate = 2% (after reduction)
8. State taxable payroll = $400,000
9. State tax before reduction = State contribution rate * State taxable payroll = 5.4% * $400,000
10. State tax after reduction = Reduced state rate * State taxable payroll = 2% * $400,000
11. Calculate the total amount of federal and state unemployment tax:
12. Total tax = FUTA tax + State tax = FUTA tax + State tax after reduction
13. Total tax = (6.2% * $400,000) + (2% * $400,000)
14. Total tax = $24,800 + $8,000
15. Total tax = $32,800