Dawn monthly gross pay is $4000
Dawn reached the maximum taxable Social Security income after 4.425 months
The amount paid on social security tax in February is $242
The amount paid on social security tax in May is $102.85
The amount paid on social security tax in November is zero
Monthly gross pay is the amount received by an employee monthly prior to the time at which tax and other deductions are being taken from his/her account.
From the parameters given:
A.
Dawn earned $48000 yearly; her monthly gross pay can be computed as:
[tex]\\ \\ \\ \mathbf{Monthly \ Gross \ pay = \dfrac{\$48000}{12}}[/tex] (since there are 12 months in a year)
Monthly gross pay = $4000
B.
To determine the month at which Dawn reach the maximum taxable social security income, we need to know the maximum taxable social security income in the year 1978.
From the graph, the taxable income in the year 1978 is $17700.
Thus, the month that Dawn reaches maximum taxable social security income is computed as:
[tex]\mathbf{=\dfrac{tax. inc \ in \ 1978}{amount \ earned \ per \ month }}[/tex]
[tex]\mathbf{=\dfrac{\$17700}{\$4000/ month }}[/tex]
= 4.425 months
C.
Looking at the graph in your textbook; in the year 1978, the social security part that was paid in one month is 6.05%.
Therefore, the amount of social security tax paid in Februrary(since it is a single month) is:
[tex]\mathbf{=\dfrac{6.05}{100}\times \$4000}[/tex]
= $242
D.
In the month of May, the difference between February month and the month of May is 4.
So, if we subtract that from the amount it takes Dawn to reach its max. taxable Social security income, we have:
= 4.425 - 4
= 0.425
Therefore, the amount of social security tax that Dawn pay in the month of May is computed as:
[tex]\mathbf{=\dfrac{6.05}{100}\times \$4000 \times 0.425}[/tex]
= $102.85
E.
Since the number of months required to complete the maximum social security tax is 4.425 months and the social security tax we are to determine is more than 4.425 months(November); we can conclude that the social security tax Dawn paid for the month of November is zero.
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