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PERSONAL EARNING POWER

PERSONAL EARNING POWER. CHAPTER 1 1-1 Salaries 1-2 Employment Opportunities 1-3 Do More, Make More 1-4 Deductions. CH 1: PERSONAL EARNING POWER Objectives. After completing this chapter, you should be able to:

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PERSONAL EARNING POWER

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  1. PERSONAL EARNING POWER CHAPTER 1 1-1 Salaries 1-2 Employment Opportunities 1-3 Do More, Make More 1-4 Deductions

  2. CH 1: PERSONAL EARNING POWERObjectives After completing this chapter, you should be able to: • calculate a weekly or monthly salary based on hourly wages, commission, or piece work. • calculate the costs of benefits other than wages offered by an employer. • compute take-home pay using a table of federal tax deductions.

  3. 1-1Salaries: Making Money Takes Time Warm-up Word Definition Symbol/Formula • Earnings • Hourly Rate • Income • Overtime Hours • Regular Hours • Salary • Self-employment Income • Wage

  4. 1-1Salaries: Making Money Takes Time Skill 1: Earnings Earnings = hourly rate ∙number of hours + tips E = rh + t where r = hourly rate h = number of hours t = tips Example 1 During the first week of February, Ed worked 16 ½ hours and received $28.50 in tips. His hourly rate is $3.40. How much did Ed earn that week? E = rh + t E = 3.40(16.5) + 28.50 E = $84.60

  5. 1-1Salaries: Making Money Takes Time Example 2 Bob works in a sporting goods store. In one week, he worked 20.25 hours. His hourly salary is $5.35. How much did Bob earn in one week? Because of the type of job he has, Bob does not earn tips. E = rh + t E = 5.35(20.25) + 0 E = $108.34

  6. 1-1Salaries: Making Money Takes Time Example 3 Mark is a waiter at a local restaurant and earns $6.00 per hour plus tips. If Mark worked 23 hours in one week and received $86.50 in tips, how much did Mark earn in that week? E = rh + t E = 6(23) + 86.50 E = $224.50

  7. 1-1Salaries: Making Money Takes Time Skill 2: Overtime Earnings Overtime hours = total hours –regular hours Total earnings = regular earnings + overtime hours ∙ overtime rate ET = rRhR + t + rOhOwhere rRhR = regular rh rOhO= overtime rh

  8. 1-1Salaries: Making Money Takes Time Example If Ed works more than 20 hours in one week, he receives 1 ½ times his regular wage rate for each of the extra hours. During the 2nd week of February there was an ice storm. Many people ordered pizza to be delivered. That week, Ed worked 26 hours and received $43.75 in tips. How much money did Ed make that week? ET = rRhR + t + rOhO ET = 20(3.40) + 43.75 + 1.5(3.40)6 ET= $142.35

  9. 1-2Employment Opportunities: So Many Choices Warm-up Word Definition Symbol/Formula • Deduction • FICA taxes • Fringe Benefits • Technology

  10. 1-2Employment Opportunities: So Many Choices Skill 1: Deductions 1.The cost of extra taxes and fringe benefits for Dinotech Engineering are • 7.65% of gross pay for Social Security and Medicare (FICA) • 5% of gross pay to match retirement contributions • $80 per month to help pay for health insurance • $10 per month for a life insurance policy Dinotech operates 5 days a week, 52 weeks a year, or 260 days. Of the 260 workdays each year, the company grants its employees 10 vacation days, 6 holidays, and up to 10 sick-leave days. 2. Nonworking days = dollars earned on nonworking days total days amount earned for entire year

  11. 1-2Employment Opportunities: So Many Choices Example Dinotech plans to offer the new engineer $45,000 per year as a starting salary. How much must the company budget to cover the engineer ‘s fringe benefits? How much of the engineers $45,000 salary is paid for nonworking days? 1. a. 7.65%(45,000) = $3442.50 for FICA b. 5%(45,000) = $2,250 for Retirement c. 80(12) = $960 for Health insurance d. 10(12) = $120 for Life insurance Total additional costs: $6,772.50 2. Nonworking days = dollars earned on nonworking days total days amount earned for entire year 26 = x 260 45,000 x = $4500 for nonworking days

  12. 1-2Employment Opportunities: So Many Choices Skill 2: Fringe benefits Daphne’s older friend Chloe has completed her engineering training and is considering accepting a position at Aerotech. She has also been offered a position at Electron Research.

  13. 1-2Employment Opportunities: So Many Choices Example cont. Which of the two companies is offering Chloe more money including fringe benefits? Total offer: $52,480

  14. 1-2Employment Opportunities: So Many Choices Example cont. Which of the two companies is offering Chloe more money including fringe benefits? Total offer: $52,320 Aerotech has the better offer.

  15. 1-3Do More, Make More: Commissions and Payments by Items Warm-up Word Definition Symbol/Formula • Base Salary • Commission • Earnings with Commission • Graduated Commission • Item Rate • Piece Rate • Push Money

  16. 1-3Do More, Make More: Commissions and Payments by Items Skill 1: Commission Commission = price ∙commission rate ∙ number sold C = prnwhere p = price of one item r = commission rate n= number of items sold

  17. 1-3Do More, Make More: Commissions and Payments by Items Example 1 Betty’s friend Rosalie is a salesperson at a department store. She receives a 7% commission for selling small appliances and housewares. Among the many items that she sells is a fancy ceramic mug. Rosalie would like to know how many mugs she needs to sell to earn at least $50. The mugs sell for $12.85 each. C = prn 50 = 12.95(7%)n 56 mugs = n

  18. 1-3Do More, Make More: Commissions and Payments by Items Example 2 Sue sells futons for a living. She earns 5.1% commission on each sale. If she sold three futons for $425.50 each, how much did she earn in commission?. C = prn C = 425.50(5.1%)3 C = $65.10

  19. 1-3Do More, Make More: Commissions and Payments by Items Skill 2: Earnings with commission Earnings with Commission = salary + commission rate ∙ total sales E = s + rtwhere s = monthly salary r = commission rate t = total sales for the month

  20. 1-3Do More, Make More: Commissions and Payments by Items Example 1 William earns a salary of $1000 per month selling cars plus a commission of 6% on each car that he sells. In his first month on the job, he sold 3 cars for a total of $29,500 in car sales. How much did William earn in all? E = s + rt E = 1000 + 6%(29,500) E = $2770

  21. 1-3Do More, Make More: Commissions and Payments by Items Example 2 Sally earns a weekly salary of $200.00. She is also paid a 4.5% commission on sales. During one week, Sally sold $5,250.00 worth of furniture. How much did Sally earn in this week? E = s + rt E = 200 + 4.5%(5250) E = $436.25

  22. 1-3Do More, Make More: Commissions and Payments by Items Example 3: Graduated Commission Yvette is a real-estate salesperson. Her earnings are based on a graduated commission. She receives 4% of any sale up to $100,000. For any amount over $100,000 she receives a 6% commission. Last Sunday she sold the house described below. MINT CONDITION!! $109,000 You’ll appreciate the love and care that went into this stunning 3-bdrm, 2-bath home. Vaulted ceilings, custom drapes, mst. bath w/whirlpool/double vanity.

  23. 1-3Do More, Make More: Commissions and Payments by Items Example 3 cont. How much did Yvette make selling the home? Commission on $100,000 C1= pr C1 = 100,000(4%) Commission on amount over $100,000 C2= pr C2 = 9,000(6%) Total Commission = C1 + C2 C = 4000 + 540 C = $4,540

  24. 1-3Do More, Make More: Commissions and Payments by Items Example 4 Steven sells luxury cars. He earns 5% sales commission. However, on sales over $50,000 he earns 6.5% commission. If he sells a car for $67,550.00, what is Steven's commission? C1= pr C2= pr C1 = 50,000(5%) C2 = 17,550(6.5%) C1 = 2500 C2 = 1140.75 Total Commission = C1 + C2 C = 2500 + 1140.75 C = $3640.75

  25. 1-3Do More, Make More: Commissions and Payments by Items Skill 3: Piece Rate Earnings from Piece Rate = piece rate ∙ number sold E = rnwhere r = the piece or item rate n = number of items sold Example 1 Carole decorates wedding cakes at Sloane’s Bakery. Mrs. Sloane pays her $16 for each cake that she decorates. How much money did Carole earn in a week in which she decorated 5 wedding cakes? E = rn E = 16(5) E = $80

  26. 1-3Do More, Make More: Commissions and Payments by Items Example 2 John makes rocking chairs at a local furniture shop. He is paid $35.00 per chair. If he makes seven chairs, how much has he earned? E = rn E = 35(7) E = $245

  27. 1-3Do More, Make More: Commissions and Payments by Items Example 3 Mrs. Sloan needs Carole to help her with customers when she is not busy decorating cakes. She has offered Carole a choice of one of two payment plans. Plan 1: Salary of $120 for a 20-hour week and $12 for each cake Plan 2: Salary of $105 for a 20-hour week and $14.50 for each cake Which plan should Carole choose?

  28. 1-3Do More, Make More: Commissions and Payments by Items Example 3 cont. Plan 1: E = s + rn Plan 2: E = s + rn E = 120 + 12n E = 105 + 14.50n Solve the system by setting the two equations equal to each other. 120 + 12n = 105 + 14.50n 6 cakes = n Carole will earn the same money under both plans if she decorates 6 cakes.

  29. 1-3Do More, Make More: Commissions and Payments by Items Example 3 cont. To determine which is the better plan, let n = 7. Plan 1: E = s + rn Plan 2: E = s + rn E = 120 + 12(7) E = 105 + 14.50(7) E = $204 E = $206.50 Plan 2 is better when n › 6. Plan 1 is better when n ‹ 6.

  30. 1-3Do More, Make More: Commissions and Payments by Items Example 4 Becky was offered the salary plans below. If Becky thinks she can write 10 editorials in a month, which plan will pay Becky more? Plan 1: $1200 per month with an additional $7.00 per article. Plan 2: $1250 per month with an additional $6.25 per article. Plan 1: E = s + rn Plan 2: E = s + rn E = 1200 + 7(10) E = 1250 + 6.25•10 E = $1270 E = $1312.50 Plan 2 will pay Becky more.

  31. 1-4Deductions: Who Gets What? Warm-up Word Definition Symbol/Formula • Deduction • Disability Insurance • FICA Deduction • Form W-4 • Gross Pay • Health Insurance • Income Security • Medicare

  32. 1-4Deductions: Who Gets What? Warm-up Word Definition Symbol/Formula • Retirement Benefits • Social Security • Survivors Insurance • Take-Home Pay

  33. 1-4 Deductions: Who Gets What? W-4 Form

  34. 1-4 Deductions: Who Gets What? Reading a pay stub

  35. 1-4Deductions: Who Gets What? Skill 1: Take-home pay The tax rate for Social Security on incomes under $57,000 is 6.2%. The Medicare tax rate is 1.45% for wages at or below $135, 000. If annual income is less than $57,000, the deduction for FICA taxes is 7.65% of gross pay. FICA tax = 7.65% g where g = gross pay Take-home pay = gross pay – all deductions T = g – (w + f) where w = amount withheld for income taxes f = deduction for FICA taxes

  36. 1-4Deductions: Who Gets What? Example 1 Luis’s salary for this week is $95. Luis entered one withholding allowance on his W-4 form. • How much will be withheld for income tax? According to the federal income tax withholding table for single, weekly payroll, $1 will be withheld.

  37. 1-4Deductions: Who Gets What? Example 1 cont. Luis’s salary for this week is $95. Luis entered one withholding allowance on his W-4 form. • How much will be deducted for Social Security and Medicare? FICA tax = 7.65% g = 7.65%(95) = 7.2675 ≈ $7.27

  38. 1-4Deductions: Who Gets What? Example 1 cont. Luis’s salary for this week is $95. Luis entered one withholding allowance on his W-4 form. • How much is Luis’s take-home pay? T = g – (w + f) T = 95 – (1 + 7.27) T = $86.73

  39. 1-4Deductions: Who Gets What? Example 2 Chris earns $1200.00 in a month and has entered zero withholding allowance on his W-4 form. Chris is single. Find Chris's monthly take-home pay. 1. Using the reference table, it is determined that the amount withheld for income taxes is $151.00. 2. To calculate FICA deductions, 1200(7.65%)= $91.80. 3. T = g – (w + f) T = 1200 – (151 + 91.80) T = $957.20

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