Final answer:
The total unemployment tax for Roxy Co. would be the sum of the FUTA tax at 0.6% on the first $7,000 of wages per employee and the state unemployment tax at 2% of the entire $800,000 taxable payroll. The state tax would amount to $16,000, while the FUTA tax depends on the number of employees and is only applicable on the first $7,000 of their wages.
Step-by-step explanation:
The total amount of federal and state unemployment tax for Roxy Co., with a taxable payroll of $800,000, can be calculated by taking into account both the FUTA tax and the state unemployment tax rate. The FUTA tax rate is 6.2%, but this is reduced to 0.6% if the employer receives a credit for state unemployment taxes paid. The standard state contribution rate is 5.4%; however, Roxy Co.'s rate has been reduced to 2% because of stable employment experience. The FUTA tax is applicable on the first $7,000 of each employee's wages, meaning that the federal tax is calculated as 0.6% of $7,000, not on the whole $800,000 payroll.
For the state tax, Roxy Co. would apply its 2% rate to the entire taxable payroll. Therefore, the calculations for the total tax would be FUTA tax at 0.6% on the first $7,000 for each employee, plus the state tax of 2% of $800,000 for Roxy Co. After calculating these amounts, we find that the total tax can be determined as follows:
- FUTA tax = 0.6% of $7,000 = $42 per employee
- State tax = 2% of $800,000 = $16,000
Because the FUTA tax is only on the first $7,000, the actual federal tax will be less than 0.6% of the entire payroll. Assuming a sufficient number of employees to maximize the FUTA tax, the total state and federal tax for Roxy Co. would be $16,000 for state tax, plus the FUTA tax for each employee, which will be significantly less than 0.6% of the entire payroll. Neither of the given options correctly reflects this calculation, suggesting an error either in the question or the provided answer choices.