Question

(1.1: Modeling) Before paying employee bonuses and state and federal taxes, a company earns profits of $103,000. The company pays employees a bonus equal to 5% of after-tax profits. State tax is 5% of profits (after bonuses are paid). Finally, federal tax is 40% of profits (after bonuses and state tax are paid). Calculate the amounts paid in bonuses, state tax and federal tax.

Answer 1

The company will pay bonuses of $5,150 to employees. The state tax on the profits after bonuses is $4,892.50. Finally, the federal tax on the profits after bonuses and state tax is $37,183.

Step-by-step explanation:

To calculate the amounts paid in bonuses, state tax, and federal tax, we'll start with the company's profits of $103,000. First, we'll calculate the bonus paid to employees, which is 5% of the after-tax profits. Let's assume the state tax is 5% of profits after bonuses are paid. Finally, the federal tax is 40% of profits after bonuses and state tax are paid.

The bonus amount is $103,000 * 0.05 = $5,150. Then, we subtract the bonus amount from the profits to get the after-bonus profits: $103,000 - $5,150 = $97,850. Next, we calculate the state tax: $97,850 * 0.05 = $4,892.5.

To find the profits after state tax, we subtract the state tax amount from the after-bonus profits: $97,850 - $4,892.5 = $92,957.5. Finally, we calculate the federal tax: $92,957.5 * 0.40 = $37,183.

In summary, the amounts paid in bonuses, state tax, and federal tax are as follows: Bonuses: $5,150, State Tax: $4,892.50, and Federal Tax: $37,183.

Answer 2

Amount paid in;

Bonuses to employees = $5,150

State tax = $5,150

Federal tax = $41,200

Step-by-step explanation:

The bonus paid to employees, federal tax and state tax are all a percentage of the profit made by the company.

The amount of each of these elements may be computed by applying the applicable percentage on the profit made by the company before any of these deductions.

amounts paid in;

bonuses = 5% * $103,000

= $5,150

state tax = 5% * $103,000

= $5,150

and

federal tax = 40% * $103,000

= $41,200