Question

Your gross pay is $3,843.45. Your involuntary deductions are FICA (8.65%), federal withholding (9%), and state withholding (7.5%). How much are you allowed for housing and fixed expenses?

RECALL: TOTAL FIXED expenses are recommended to not exceed 36% of the total gross income

(1 point)
Responses

$1,253.25
$1,253.25

$863.64
$863.64

$510.01
$510.01

$1,035.66

Answer 1

To determine how much you are allowed for housing and fixed expenses, first, we need to calculate your total deductions and then your net income. Lastly, we will calculate the 36% of your gross pay to find out the maximum allowable expenses.

1. **Calculate Total Deductions:**
- FICA: \( 8.65\% \) of \( 3,843.45 \)
\[
\text{FICA} = 0.0865 \times 3843.45 = 331.19
\]

- Federal Withholding: \( 9\% \) of \( 3,843.45 \)
\[
\text{Federal Withholding} = 0.09 \times 3843.45 = 345.91
\]

- State Withholding: \( 7.5\% \) of \( 3,843.45 \)
\[
\text{State Withholding} = 0.075 \times 3843.45 = 288.26
\]

2. **Total Deductions:**
\[
\text{Total Deductions} = 331.19 + 345.91 + 288.26 = 965.36
\]

3. **Calculate Net Pay:**
\[
\text{Net Pay} = \text{Gross Pay} - \text{Total Deductions} = 3,843.45 - 965.36 = 2,878.09
\]

4. **Calculate Maximum Allowable Expenses (36% of Gross Pay):**
\[
\text{Maximum Allowable Expenses} = 0.36 \times 3,843.45 = 1,382.84
\]

None of the options given seem to be equal to the 36% calculation. However, if we are considering only the allowable amount from the net pay instead, we need to find 36% of the net pay:

\[
\text{36% of Net Pay} = 0.36 \times 2,878.09 \approx 1,036.11
\]

The closest option to this calculation is \( 1,035.66 \).

Thus, the answer is:

**$1,035.66**