As of June 30, 2015 (the computation date for the 2016 tax rate), Sanchez Company had a negative balance of $1,190 in its unemployment reserve account in State A. The company's average payroll over the last three 12-month periods amounted to $520,000. 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 5-12A, compute:
a. The smallest voluntary contribution that Sanchez 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 Sanchez Company's taxable payroll for 2016 is $660,000................................................................... $________
In Problem 5-12A
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%