Suppose that you work at the Peacock Blue store for 40 hours over five days at a rate of $10.25/hour. You then quit your job. Deductions are FICA (7.65%), federal withholding (15%), and state withholding (10%). Your expenses are transportation at $5.25/day, lunch at $3.85/day, and black slacks required for work at $19.95. How much is your discretionary income for the week?

Question

(1 point)
Responses

$364.50
$364.50

$344.55
$344.55

$230.63
$230.63

$210.68

Answer 1

To calculate your discretionary income for the week, we need to go through the following steps:

1. Calculate Gross Income: \[ \text{Gross Income} = \text{Hours Worked} \times \text{Hourly Rate} \] \[ \text{Gross Income} = 40 \text{ hours} \times 10.25 \text{ dollars/hour} = 410 \text{ dollars} \]

2. Calculate Total Deductions: Calculate the deductions for FICA, federal withholding, and state withholding first.

   FICA (7.65%): \[ \text{FICA} = 410 \times 0.0765 = 31.365 \text{ dollars} \]

   Federal Withholding (15%): \[ \text{Federal Withholding} = 410 \times 0.15 = 61.5 \text{ dollars} \]

   State Withholding (10%): \[ \text{State Withholding} = 410 \times 0.10 = 41 \text{ dollars} \]

   Total Deductions: \[ \text{Total Deductions} = 31.365 + 61.5 + 41 = 134.865 \text{ dollars} \]

3. Calculate Net Income: \[ \text{Net Income} = \text{Gross Income} - \text{Total Deductions} \] \[ \text{Net Income} = 410 - 134.865 = 275.135 \text{ dollars} \]

4. Calculate Total Expenses:

   • Transportation Expenses: \[ \text{Transportation} = 5.25 \text{ dollars/day} \times 5 \text{ days} = 26.25 \text{ dollars} \]
   • Lunch Expenses: \[ \text{Lunch} = 3.85 \text{ dollars/day} \times 5 \text{ days} = 19.25 \text{ dollars} \]
   • Black Slacks: \[ \text{Black Slacks} = 19.95 \text{ dollars} \]

   Total Expenses: \[ \text{Total Expenses} = 26.25 + 19.25 + 19.95 = 65.45 \text{ dollars} \]

5. Calculate Discretionary Income: \[ \text{Discretionary Income} = \text{Net Income} - \text{Total Expenses} \] \[ \text{Discretionary Income} = 275.135 - 65.45 = 209.685 \text{ dollars} \]

Rounded to two decimal places, the discretionary income is approximately $209.69.

Among the answer choices provided, the closest option is $210.68.