Answer:
option (A) $32,000 for A and $7500 for B
Explanation:
Given:
Tax rate as:
on the first $10,000 of income = 0%
10% on the next $20,000
20% on the next $20,000
30% on the next $20,000
40% on income over $70,000
Income of family A = $120,000
Thus,
For A
Up to $10,000 ; tax = 0
Tax amount from $10,000 to $30,000 at 10 % tax rate
= 10% × $20,000
= $2,000
From $30,000 to $50,000 at 20 % tax rate
= $20,000 × 20%
= $4,000
From $50,000 to $70,000 at 30 % tax rate
= $20,000 × 30%
= $6,000
Tax amount above $70,000 to $120,000 at 40 % tax rate
= (120,000 - $70,000) × 40%
= $50,000 × 40%
= $20,000
Therefore,
Total tax bill for family A
= $2,000 + $4,000 + $6,000 + $20,000
= $32,000
Similarly,
For family B
Income of family B = $55,000
Thus,
Up to $10,000 = $0
From $10,000 to $30,000 at 10 % tax rate
= $20,000 × 10%
= $2,000
From $30,000 to $50,000 at 20 % tax rate
= $20,000 × 20%
= $4,000
Tax amount from $50,000 to $70,000 at 30 % tax rate
= ($55,000 - $50,000) × 30%
= $5,000 × 30%
= $1,500
Therefore,
Total tax bill for family B = $2,000 + $4,000 + $1,500 = $7,500
Hence,
The correct answer is option (A) $32,000 for A and $7500 for B
