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scoray [572]
3 years ago
15

Trent Inc. needs an additional worker on a multiyear project. It could hire an employee for a $88,000 annual salary. Alternative

ly, it could engage an independent contractor for a $95,000 annual fee. Trent's income tax rate is 21 percent. Required: Compute the annual after-tax cost of each option and indicate which minimizes the after-tax cost of obtaining the worker
Business
1 answer:
ryzh [129]3 years ago
3 0

Answer: The cheaper cost is to <u>hire an additional worker. </u>

Explanation:

Employee:

With an employee, Trent is going to have to pay payroll taxes.

After-tax cost of hiring employee:

= Salary * (1 + Payroll tax)

= 88,000 * ( 1 + 7.5%)

= $94,600

The subtract the income tax from this amount:

= 94,600 * ( 1 - 21%)

= $74,734

Contractor:

With a contractor, only the marginal income tax is accounted for:

= 95,000 * (1 - 21%)

= $75,050

The cheaper cost is to <u>hire an additional worker. </u>

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Marginal cost, average variable cost, and average total cost will increase. Average fixed cost will not change.

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5 0
3 years ago
The Osgood county refuse department runs two recycling centers. Center 1 costs $40 to run for an eight hour day. In a typical da
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3 years ago
Game Play sells gaming systems and allows customers to mix-and-match individual components when placing a system order. Which ty
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4 0
4 years ago
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