Student
Date
13-1
Period
Calculating Costs of
New Employee Recruitment
Recruiting is the act of soliciting qualified employees to work for your company. Recruiting costs
include such things as advertising expenses, interviewing expenses, and hiring expenses.
Example
Find the total recruiting cost.
Welch Associates is seeking a Senior Business Analyst. Advertising costs for the position were
$3,275. They used an employment service in their placement search that charged a 25 percent fee
on the first year salary of $80,000. Interviewing expenses for candidates totaled $2,835. Hiring
costs included moving expenses of $4,750 plus a 5 percent broker’s fee on the sale of the new
employee’s house. The house sold for $175,000. What are Welch’s total recruiting costs?
1. Add the recruiting costs.
Advertising Expenses Interviewing Expenses Hiring Expenses Total Recruiting Cost
$3,275 $2,835 [($80,000 25%) $4,750 ($175,000 5%)] $39,610 total recruiting cost
Practice
Find the total recruiting cost.
Advertising
Expenses
1.
$ 875
2.
$1,290
3.
$550
4.
$1,529
Interviewing
Expenses
$1,492
$544
and $379
$1,364
$736
and $932
Hiring
Expenses
Total
Recruiting Costs
$500
and $15,000
$624
and $2,381
$12,307
$327,
$5,230,
and $11,178
5. Luxbrite Corporation hired Susan Phillips at an annual salary of $62,500. Advertising costs for
the position totaled $2,320. The employment agency’s finder’s fee is 20 percent of the first
year’s salary. Interviewing costs were as follows: Susan Phillips $237 and Hal Oberlan $354.
What was the total recruiting cost?
6. Standardized Test Practice Newtell Agency hired Sylvia Axton as its new Director of
Accounting Services at an annual salary of $125,000. Executive Services charged a fee of 25
percent of the first year’s salary to help find candidates. Local advertisements totaled $1,389.
Newtell also paid moving costs of $3,599 for Axton plus a 4 percent broker’s fee on the sale
of her $220,000 home. Interviewing costs for Axton and 2 other candidates totaled $2,337.
What were the total recruiting costs to fill the position?
A. $7,325 B. $38,575 C. $47,375 D. $352,325
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Section 13-1
Study Guide 87
Student
Date
22-3
Period
Determining the Maturity Value
of a Commercial Loan
Your business may borrow money to buy raw materials, products, or equipment by taking out
a commercial loan, or business loan. The maturity value of your loan is the total amount you
must repay. The maturity value includes both the principal borrowed and the interest on the loan.
Commercial loans usually charge ordinary interest at exact time, that is, your loan term length is
calculated by dividing the exact number of days of the loan by 360 days. Commercial loans
usually have interest rates that are one to two percentage points higher than the prime rate.
The prime rate is the lowest rate of interest available to commercial customers at a given time.
Example
Find the interest owed and the maturity value.
To expand its business, High-Tech Electronics borrowed $150,000 from National Bank. The bank
lent the money at 1 percent above the prime rate of 5.5 percent. The loan is ordinary interest for
120 days. What is the maturity value of the loan?
1. Find the interest owed.
Interest Principal Rate Time
$150,000 (5.5% 1%) 120/360
$150,000 6.5% 1/3 $3,250 interest owed
2. Find the maturity value.
Maturity Value Principal Interest Owed
$150,000 $3,250 $153,250 maturity value
Practice
Find the interest owed and the maturity value using ordinary interest at exact time.
1.
2.
3.
4.
Principal
Rate
Time
(in days)
$ 75,000
125,000
200,750
275,389
6.000%
6.500%
5.250%
3.875%
150
120
240
180
Interest
Owed
a.
a.
a.
a.
Maturity
Value
b.
b.
b.
b.
5. First United lent Educational Gift Company $185,000 to expand its business. The term of the
loan is 240 days. The interest rate is 1.5 percent over prime. If the prime rate is 4.75 percent,
what is the maturity value of the loan?
6. Standardized Test Practice To expand its business, Neo Standards took out a $200,000 real
estate loan with National Bank for 270 days at 2.5 percent above the prime rate of 5.25
percent. It also took out a $50,000 loan with its local bank for 120 days. The local bank
charges 1.5 percent above the prime rate of 5.25 percent. What is the total combined interest
owed for both loans?
A. $11,625 B. $12,750 C. $1,125 D. $262,750
158 Section 22-3
Study Guide
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Student
Date
2-6
Period
Computing Your Net Pay
Taxes and insurance aren’t the only things deducted from your gross pay. Union dues, state tax,
and local tax might also be deducted. An earnings statement lists your gross pay, all your
deductions, and your net pay for each pay period. (Note: Use the Social Security tax rate of
6.2 percent on the first $84,900 earned, the Medicare tax rate of 1.45 percent on all earnings,
and the tax tables on pages 170–173 for federal income tax.)
Net Pay Gross Pay Total Deductions
Example
Find the net pay.
Isaac Reiser’s gross weekly salary is $515. He is single and claims one allowance. The state tax is
2.8 percent of gross pay with no personal exemption allowances. Reiser also participates in his
employer’s medical insurance plan, which costs him $16.83 per week. What is his net pay for the
weekly pay period?
1. Find his total deductions.
a. Federal income tax: $55.00
b. Social Security: $515 0.062 $31.93
c. Medicare: $515 0.0145 $7.47
d. State tax: $515 0.028 $14.42
e. Medical insurance: $16.83
2. Find his net pay.
Gross Pay Total Deductions
$515.00 $125.65 $389.35 net pay
Total Deductions $55.00 + $31.93 + $7.47 + $14.42 + $16.83 $125.65
Practice
Find the net pay.
1. Serena Masters is single and claims 1 allowance. Her gross weekly pay is $440.00. Each week
she pays federal, Social Security, and Medicare taxes, $14.40 for medical insurance, and $10.00
for union dues.
2. Dustin Ambrose is married and claims 3 allowances. His gross weekly pay is $628.00. Each
week he pays federal, Social Security, and Medicare taxes, $52.00 for medical insurance, and
$23.50 toward his retirement fund.
3. Andre Quinn earns $600 per week. He is married and claims 2 allowances. Weekly deductions
include federal, Social Security, and Medicare taxes, a state tax of 2.5 percent on gross
earnings, a local tax of 1 percent on gross earnings, and medical insurance. The company pays
65 percent of the $3,975 annual medical cost.
4. Standardized Test Practice Barbara Brach earns $492.00 per week. She is single and claims
1 allowance. Her state tax rate is 2.8 percent and her local tax rate is 1.25 percent, both on
gross earnings. Her medical insurance plan costs $2,550.00 per year, of which the company pays
70 percent. Medicare and Social Security are also deducted from her paycheck. What is her
net pay?
A. $331.10 B. $368.74 C. $388.36 D. $367.73
14 Section 2-6
Study Guide
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.