Question

Fiona, a regional sales manager, works from her office in State U. Her region includes several states, as indicated in the sales report below. Fiona is compensated through straight commissions on the sales in her region and a fully excludable cafeteria plan conveying various fringe benefits to her. Determine how much of Fiona’s $250,000 commissions and $75,000 fringe benefit package is assigned to the payroll factor of State U.

State Sales Generated Fiona’s Time Spent There
U $3,000,000 20%
V 4,000,000 50%
X 8,000,000 30%

Answer 1

Payroll factor State U:

• commissions $50,000
• fringe benefit package $15,000

Step-by-step explanation:

State Sales Generated Fiona’s Time Spent There

U $3,000,000 20%

V $4,000,000 50%

X $8,000,000 30%

Sales percentage generated in state U = $3,000,000 / $15,000,000 = 20%

so 20% of the $250,000 commissions should be assigned to state U = $50,000

Time spent in state U = 20% x $75,000 fringe benefits = $15,000 assigned to state U