An employee earning $3,500 per month has the following deductions: FICA $267.75, federal income tax $420, state income tax $105, and health insurance $150. What is the employee's net pay?
Correct Answer
D) $2,557.25
Net pay = Gross pay - Total deductions = $3,500 - ($267.75 + $420 + $105 + $150) = $3,500 - $942.75 = $2,557.25
Why This Is the Correct Answer
Option A is correct because net pay equals gross pay minus all deductions. Starting with $3,500 gross pay, we subtract FICA ($267.75), federal income tax ($420), state income tax ($105), and health insurance ($150). Total deductions are $942.75. Therefore: $3,500 - $942.75 = $2,557.25. This represents the actual amount the employee receives after all mandatory and voluntary deductions.
Why the Other Options Are Wrong
Option A: $2,980.00
This amount ($2,650) shows partial deduction calculation, subtracting $850 instead of the correct $942.75. This suggests arithmetic errors in adding the deductions or potentially missing some deduction amounts in the calculation process.
Option B: $2,650.00
This amount ($2,825) indicates incomplete deduction calculations. It suggests subtracting only $675 from gross pay, missing significant portions of the total deductions. This could result from calculation errors or omitting certain deduction categories.
Option C: $2,825.00
This amount ($2,980) suggests only some deductions were subtracted, likely missing one or more categories. It appears to subtract approximately $520 from gross pay, which doesn't account for all the listed deductions totaling $942.75.
Memory Technique
Remember 'FISH' for payroll: Federal tax, Insurance, State tax, FICA - subtract all from gross to get Home pay (net pay).
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