As of June 30, 2015 (the computation date for the 2016 tax rate), Amanda Company had a negative balance of $1,015 in its unemployment reserve account in State A. The company's average payroll over the last three 12-month periods amounted to $525,000. The unemployment compensation law of State A provides that the tax rate of an employer who has a negative balance on the computation date shall be 7.2% during the following calendar year.
Using the tax rate schedule presented in Problem 5-12B, compute:
a. The smallest voluntary contribution that Amanda Company should make in order to effect a change in its tax rate ................................................................ $_________
b. The amount of the tax savings as a result of the voluntary contribution if Amanda Company's taxable payroll for 2016 is $650,000 ........................................ $_________
In Problem 5-12B
Reserve Ratio Contribution Rate
0.0% or more, but less than 1.0%......................................... 6.7%
1.0% or more, but less than 1.2%......................................... 6.4%
1.2% or more, but less than 1.4%......................................... 6.1%
1.4% or more, but less than 1.6%......................................... 5.8%
1.6% or more, but less than 1.8%......................................... 5.5%
1.8% or more, but less than 2.0%......................................... 5.2%
2.0% or more, but less than 2.2%......................................... 4.9%
2.2% or more, but less than 2.4%......................................... 4.6%
2.4% or more, but less than 2.6%......................................... 4.3%
2.6% or more, but less than 2.8%......................................... 4.0%
2.8% or more, but less than 3.0%......................................... 3.7%
3.0% or more, but less than 3.2%......................................... 3.4%
3.2% or more ........................................................................ 3.1%