Mrs. Eller's corporate employer has a cafeteria plan under which its employees can receive a $3,000 year-end Christmas bonus or enroll in a qualified medical reimbursement plan that pays up to $3,000 of annual medical bills. Mrs. Eller is in a 24 percent tax bracket, and her medical bills average $2,300 each year.

Required:

1. a-1. Compute the after-tax value of Christmas bonus and medical reimbursement plan. (Ignore any payroll tax implications.)
2. a-2. Should Mrs. Eller choose the cash bonus or the nontaxable fringe benefit?
3. b-1. If Mrs. Eller is in the 12 percent tax bracket, compute the after-tax value of Christmas bonus and medical reimbursement plan.
4. b-2. Should Mrs. Eller choose the cash bonus or the nontaxable fringe benefit?