Question

Peter has a job that pays \(\$ 17.50\) per hour for 40 hours per week, and he is paid each Friday. This week the company deducted \(\$ 44.94\) for Social Security, \(\$ 10.50\) for Medicare, \(\$ 7.00\) for State Disability Insurance, and \(\$ 79.50\) for Income Tax Withholding. What is Peter's take-home pay this week if he has no other deductions? A. \(\$ 141.94\) B. \(\$ 558.06\) C. \(\$ 700.00\) D. \(\$ 841.94\)

Short answer

Peter's take-home pay is \$ 558.06.

Step-by-step solution

Calculate Gross Weekly Pay

Multiply Peter's hourly wage by the number of hours he works per week. The hourly wage is \$ 17.50 per hour, and he works 40 hours per week. The gross pay can be calculated as: \[\text{Gross Pay} = 17.50 \times 40 = 700.00 \$ \]

Sum the Deductions

Add up all the deductions made from Peter's paycheck for this week. The deductions are as follows: - Social Security: \$ 44.94 \ - Medicare: \$ 10.50 \ - State Disability Insurance: \$ 7.00 \ - Income Tax Withholding: \$ 79.50 \ Sum of deductions: \[\text{Total Deductions} = 44.94 + 10.50 + 7.00 + 79.50 = 141.94 \$ \]

Calculate Take-Home Pay

Subtract the total deductions from the gross weekly pay to determine Peter's take-home pay for the week. \[\text{Take-Home Pay} = \text{Gross Pay} - \text{Total Deductions} = 700.00 - 141.94 = 558.06 \$ \]

Key concepts

Gross Pay

Gross pay is the total amount of money earned before any deductions are subtracted. It's the initial, unadjusted income received for work done. In Peter's case, his gross pay is calculated by multiplying his hourly wage by the number of hours he works in a week. For Peter, he earns \$ 17.50\ per hour and works 40 hours a week. By multiplying these values, we get his gross pay: \[ \text{Gross Pay} = 17.50 \times 40 = 700.00 \text{ dollars} \] This amount is before any taxes or other deductions are taken out.

Deductions

Deductions are amounts that are subtracted from your gross pay. These can include taxes, insurance payments, retirement fund contributions, and more. For Peter, the total deductions include:

• Social Security: \$ 44.94\
• Medicare: \$ 10.50\
• State Disability Insurance: \$ 7.00\
• Income Tax Withholding: \$ 79.50\

To find Peter's total deductions, we simply add up all these amounts: \[ \text{Total Deductions} = 44.94 + 10.50 + 7.00 + 79.50 = 141.94 \text{ dollars} \] These deductions are necessary to cover various compulsory and elective expenses and contributions.

Take-Home Pay

Take-home pay is the amount of money you actually receive after all deductions have been subtracted from your gross pay. It's also known as net income or net pay. To calculate Peter's take-home pay, we subtract his total deductions from his gross pay: \[ \text{Take-Home Pay} = \text{Gross Pay} - \text{Total Deductions} = 700.00 - 141.94 = 558.06 \text{ dollars} \] This is the amount Peter will actually receive in his paycheck after his company has deducted the required amounts for his various obligations.