BUSINESS MATH - MIDTERM

BUSINESS MATH MIDTERM REVIEWER 2. Ronnie receives a salary of php 3,465 a week.
SESSION 8 a) What is Ronnie’s gross pay for 4 weeks of
Introduction to Salaries and Wages work?
b) What is Ronnie’s gross pay for one year of
Compensation or income - refers to all forms of pay work?
(salary, wages, pay or benefits) that go to the Gross Pay = Pay per period x number of periods
employees which arise from their employment. worked
Salary – is associated with the employee Compensation by hourly Wage: Straight Time – an
compensation computed weekly, monthly or annually employee who is paid by the hour works at and hourly
Wage - is associated with the employee rate which is a certain amount of pay for each hour
compensation computed weekly, monthly or annually worked. The gross pay earned by employees who are
or piece work basis. paid by the hour is computed by multiplying the pay
per hour by the hours they have worked.
Benefits - also known as fringe benefits, are non-
financial forms of compensation offered in addition to Gross Pay = Rate per hour x Number of hours worked
cash salary to enrich employees’ lives Compensation by hourly wage: Overtime – if an
Gross pay/wage - are the total amount of money with employee renders service beyond the regular time
which an employee is paid. It may also be called total which is 8 hours or 40 hours a week, he is said to have
earnings or total pay. It represents the total earnings rendered overtime. The payment for overtime
before any deductions are made. services is called overtime pay. The rate for overtime
SALARY PERIOD NO. OF pay is different from the rate for regular time. 
PAID PAYCHECKS Time and half rate = 1.5 x regular rate
Weekly Once 52 paychecks each Compensation by hourly wage: Double Time – an
per year employee who works on Sundays and holidays in the
week form of double time; that is, double the hourly wage.
Biweekly Every 2 26 paychecks each Double time rate = 2 x regular rate
weeks year
Semimonthl Twice a 24 paychecks each If an employee renders overtime, the gross pay is
y month year computed as follows
Monthly Once a 12 paychecks each Gross pay = Regular pay + overtime pay
month year
Sample Problem #3 –
Sample Problem #1 –
3. An employee worked for 38 hours in one
1. A manager of a plastic manufacturing week at a hourly wage of php 45. How much
company earns a monthly salary of Php would he he/she earn?
24,500.
a) What is his annual salary? Sample Problem #4 –
b.) What is his weekly salary? 4. A company pays and hourly rate of Php 75.50
for regular time. Compute the overtime rate,
Definition: a) if It pays time and a half
X X b) if it pays double time
Weekly salary = Bi-weekly salary =
P P Sample Problem # 5 –
X X
Semi-monthly salary = monthly salary = 5. Ernie works in a company with an hourly rate
P P
 Let X be annual salary of php 53.50 and time and a half for overtime.
 Let P be number of paychecks each year With his regular time of 8 hours a day, what is
his gross pay for the week if his time record
shows the following data?
Sample Problem #2 –

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ANSWERS: Regular pay = 53.50 x 40 = 2,140

Sample Problem # 1
a.) X = 294,000 b.) weekly salary = 5,653.85

Sample Problem # 2
a.) 13,860 b.) 180,180 The overtime pay is computed as follows:

Sample Problem # 3 DAYS HOURS

Gross Pay = 45 x 38 = 1,710 WORKED
Thus, the employee would earn php 1,710
MONDAY 11
Sample Problem # 4 TUESDAY 8.5
a.) time and a half rate is computed as follows:
time and a half rate = 1.5 x regular rate time and a WEDNESDA 9
half rate = 1.5 x 75.50 = 113.25 Y
thus, the overtime rate using time and half is php
113.25 per hour THURSDAY 10.5
b.) double time rate is computed as follows: FRIDAY 8
double time rate = 2 x regular rate
double time rate = 2 x 75.50 = 151
thus, the overtime rate using double time is php 151 Overtime pay = OT rate x total overtime hours
per hour Overtime pay = 80.25 x 7 = 561.75

Sample Problem # 5 – The gross pay is computed as follows:

Step 1: the regular rate is php 53.50 while the Gross pay = Regular pay + Overtime pay
overtime rate is computed as follows: Gross pay = 2,140 + 561.75 = 2701.75
Time and half rate = 1.5 x hourly rate
= 1.5 x 53.50 = 80.25 Thus, Ernie’s gross pay for the week is php 2,701.75
Thus, the overtime rate is php 80.25

Step 2: to compute the gross pay, prepare a table like SESSION 9

this one below: COMPENSATION METHODS
DAYS HOURS REGULA OVERTIM Commission – a compensation in the form of a
WORKE R TIME E percentage of total sales.
D  Some sales people earn commissions instead
MONDAY 11 8 3 of a fixed salary or hourly pay. One is paid on
a commission basis when as part of gross pay,
TUESDAY 8.5 8 0.5 the person receives a percentage of his total
sales. Both salary and a commission may be
WEDNESD 9 8 1 earned.
AY
There are three (3) different types of wages based on
THURSDAY 10.5 8 2.5 commission:

FRIDAY 8 8 0 a. Straight commission – employees whose

earnings come only from commission work
TOTAL 40 7 hours
hours GROSS PAY = Amount of Sales x Rate of commission
b. Salary plus commission – employees whose
earnings come from commission work and
The regular pay is computed as follows: fixed salary
Regular pay = hourly rate x total regular time

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COMMISSION = Amount of Sales x Rate of Wendy receives a basic salary of php 18,400 monthly
commission and a 2% commission on all sales. If her sales for the
current month is php 98,000, what is her gross pay?
c. Salary plus bonus – employees whose
earnings come from a given fixed salary and The amount of commission is computed as follows:
bonus. The bonus is based on sales target or
quota. If their sales exceed the quota, they
are given additional amount called bonus. Commission = Amount of Sales x Rate of commission
GROSS PAY = Salary + Bonus Commission = 98,000 x 0.02 = 1,960
BONUS = Rate of Commission x Sales in Excess of The gross pay is computed as follows:
Quota
Gross Pay = Salary + Commission
SALES in EXCESS in QUOTA = Sales – Quota
Gross Pay = 18,400 + 1,960 = 20,360
Piece-work Pay – is a pay plans pay wages based on
the amount of work completed or the number of units  Thus, Wendy’s gross pay is php 20,360
or pieces produced. Their wages are paid on piece- EXAMPLE 3
rate basis.
Edith is a sales agent who receives a monthly salary of
There are several variations of piece-work payment php 22,400, plus a 3% commission on all sales in
plans: excess of php 60,000. Compute her gross pay
a. Straight Piece-work Pay – employees that are a) if her sales for the month is php 87,000
paid only for the usable pieces produced.
They get no pay or the pieces that are b) if her sales for the month is php 53,500
rejected.
a.) Compute the amount bonus:
STRAIGHT PIECE-WORK PAY = Rate per piece x
Bonus = Rate of Commission x Sales in Excess of Quota
Number of Pieces Produced
Bonus = (0.3)(87,000-60,000)
b. Bonus and Piece-work Plan – an employee
receives a straight piece-work pay plan for a = (0.3)(27,000) = 810
given number of units produced and, in
addition, receives a bonus for each piece b.) The amount of sales is less than php 60,000. There
produce above a given number. is no bonus and thus, the gross pay is the fixed salary
which is php 22,400.
GROSS PAY = Straight Piece-work Pay – Bonus Pay
EXAMPLE 4
BONUS PAY = Rate per piece x number of pieces
produced. Linda works in a factory that produces dolls. She is
paid php 17.50 for each doll produced and a bonus of
EXAMPLE 1 php 19.25 for each doll produced in excess of 100
dolls. If she has been able to make 123 dolls for three
Raquel, who works for a clothing store, sells php
days, what is her gross pay?
120,000 during the month of July, if she is paid 16%
on straight commission basis, how much is her gross Step 1: the straight piece work pay is computed as
pay? follows:
The gross pay is computed as follows: Straight piece-work pay = rate per piece x number of
pieces produced
Gross Pay = Amount of Sales x Rate of Commission
Gross Pay = 120,000 x 0.16 = 19,200 Straight piece-work pay = 17.50 x 100 = 1,750
 Thus, Raquel’s gross pay is php 19,200 Step 2: the bonus pay is computed as follows:
EXAMPLE 2 Bonus Pay = Rate per piece x number of pieces
produced

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Bonus Pay = 19.25 x 23 = 442.75 d. single

Step 3: the gross ay is computed as follows e. zero exemption for employees with multiple
employers for their second, third, …employers (main
Gross Pay = Straight Piece-Work Pay + Bonus Pay employer claims personal and additional exemption)
Gross Pay = 1,750 + 442.25 = 2,192.25 f. zero exemption for those who failed to file
 Thus, Linda’s gross pay is php 2,192.25 application for registration
• Use Part B of the table for the following single
or married employees with qualified
dependent/s
Session 10: Net Pay a. employed husband, and the husband who claims
Net pay (take home pay)– is the amount of pay that exemptions of children
the employee gets after deductions are made. b. employed wife whose husband is also employed or
Withholding Tax engaged in business, but the waives his claim for
dependent children in favor of the employed wife
It is the most basic and fundamental deduction
applied to the employees’ gross pay. Every employee c. single, with qualified dependent/s
is required to pay his/her income tax annually. The
one-time payment if this amount is big. Thus,
employers deduct certain amount from employees’ Contribution:
taxable salary every pay period SSS Contributions – this provides benefits to the
 The amount of withholding tax to be deducted employees like salary loans, sickness benefits,
depends on the following: disability benefits and retirement benefits. All
employees working in private companies are
 Gross pay –the total amount of income per automatically enlisted as members and thus they are
payment period required to pay their SSS contributions.
 Status of the employee – this refers to the GSIS Contributions – all government employees are
civil status of the employee. being deducted a certain amount depending upon the
salary of the employees. The GSIS contribution table is
 Number of dependents – this refers to the
almost similar to the SSS contribution table and works
number of dependent children who are not
in practically the same way
more than 21 years old. A 21 years old or
more is considered dependent if suffering   Philhealth Contributions – it is a mandatory
from disability or mental disorder. deduction applied to all private and government
employees. Members of Philhealth get assistance
 Payroll Period – this refers to the payment
during hospitalization and sickness.
period (daily, weekly, semi-monthly or
monthly) HDMF or PAG-IBIG Contribution – it is another
personal income deduction that is mandate by law.
 Guide:
 
Use Part A of the table for the following single or
married employees, with no qualified dependent/s Session 11-12
Income Tax return
a. married employee (husband or wife) whose spouse
is unemployed
The law requires individuals to file their income tax
b. married employee (husband or wife) whose spouse return every year. The following individuals are
is a non-resident citizen and is receiving income from required to file the income tax returns.
foreign sources
1. Resident citizens receiving income from sources
c. married employee (husband or wife) whose spouse within or outside the Philippines
is engaged in business
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• employees deriving purely compensation 3. an individual whose compensation income derived

income from 2 or more employers from one employer does not exceed Php 60,000 and
concurrently or successively at any time the income tax on which has been correctly withheld.
during the taxable year
Basic Exemptions
• employees deriving purely compensation
Individuals who are earning compensation income, or
income regardless of the amount whether
from a single or several employees during the engaged in business or deriving income from the
practice of profession, are entitled to personal and
calendar year, the income tax of which has
not been withheld correctly (tax due is not additional exemption as follows:
equal to the tax withheld) resulting in Personal Exemptions
collective or refundable return
For single individual or married individual judicially
• self- employed individuals receiving income decreed as legally separated with no qualified
from the conduct of trade or business and/or dependents, the amount of personal exemption is
practice of profession. php 50,000. For each married individual, the amount
• individuals deriving mixed income, ie., personal exemption is php 50,000. In case of married
individuals where only one of the spouses is deriving
compensation income and income from the
conduct of trade or business and/or practice gross income, only such spouse will be allowed to
claim the personal exemption.
profession.
• individuals deriving other nonbusiness, Additional Exemptions
nonprofessional related income in addition to For each qualified dependent, a Php 25,000 additional
compensation income not otherwise subject exemption can be claimed but only up to 4 qualified
to final tax. dependents.
• individuals receiving purely compensation The additional exemption can be claimed by the
income from a single employer, although the following:
income of which has been correctly withheld,
but whose spouse is not entitled to 1. The husband who is deemed the head of the
substituted filing family unless he explicitly waives his right in
favor of his wife
• marginal income earners
2. The spouse who has custody of the child or
2. non-resident citizens receiving income from sources children in case of legally separated, provided,
within the Philippines that the total amount of additional
3. aliens, whether resident or not, receiving income exemptions that may be claied by both shall
not exceed the maximum of additional
from sources within the Philippines.
exemptions allowed the by Tax Code.
4. Corporation shall include partnerships, no matter
Nontaxable compensation income
how created or organized.
5. Domestic corporations receiving income from These incomes are exempted or not included in the
computation of tax due. These are deducted from the
sources within and outside the Philippines
gross compensation income in computing the taxable
6. Foreign corporations receiving income from sources income.
within the Philippines
• Holiday Pay
7. Estates and trusts engaged in trade or business • Overtime Pay
• Night Shift differential
The following individuals are not required to file • Hazard Pay
income Tax returns: • 13th Month pay
1. an individual who is a minimum wage earner • SSS, GSIS, Philhealth and Pag-ibig
Contributions
2. an individual whose gross income does not exceed
his total personal and additional exemptions
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Taxable compensation income Step 1: Determine the amount of personal and

additional exemptions.
The following are example of taxable income where
tax due is computed Php 50,000 personal exemption because she is single
• Basic Salary Step 2: Compute the taxable income by subtracting
• Representation Allowance the sum of nontaxable income, personal exemption,
• Transportation Allowance and additional exemption from the gross
• Cost of living Allowance compensation income
• Fixed Housing Allowance
So, the amount of taxable income is Php 52,000
Step 3: Compute the tax due, using the tax table

Computing tax due Tax due = 2,500 + 0.15 (52,000-30,000) = 5,800

So, the amount of tax due is Php 5,800
The amount of tax due is computed, based on the
amount of taxable income. The amount of taxable Example 2
income is determined by deducting the sum of
nontaxable income, the personal exemptions, and Gina Faeldon is an employee in a private company
additional exemptions from the gross compensation with a gross compensation income of Php 214,000.
income. She is married with six dependent children and her
husband is unemployed. The amount for her
nontaxable income is Php 23,000. Compute her tax
Steps in Computing the Amount of Tax Due due.
Step 1: Determine the amount of personal and
• Determine the gross compensation income
(GCI) additional exemptions.
Php 50,000 personal exemption because she is
• Determine the amount of nontaxable income
Gross Compensation Income Php 120,000
• Determine the amount of personal and
additional exemptions Less  
Nontaxable income (SSS, Php 18,000
• Subtract the amount of nontaxable income, Philhealth, Pagibig)
personal, and additional exemptions from the Personal Exemption Php 50,000
GCI to get the amount of taxable income.
• Compute the amount of tax due, using the tax Taxable Income Php 52,000
table

married
Taxable Income Tax Due
Php 100,000 additional exemption because of the 4
Not over Php 10,000 5% children

Over Php 10,000 but not over Php 500 + 10% of the excess Step 2: Compute the taxable income by subtracting
Php 30,000 over Php 10,000 the sum of nontaxable income, personal exemption
from the gross compensation income.
Over Php 30,000 but not over Php 2500 + 15% of the excess
Php 70,000 over Php 30,000 So, the amount of taxable income is Php 41,000
Example 1
Step 3: Compute the tax due, using tax table.
Over 70,000 but not over Php Php 8,500 + 20% of the
Tricia Calinisan is a private employee with a gross
140,000 excess over Php 70,000 Tax Due = 2,500 + 0.15 (41,000-30,000) = 4,150
compensation income of Php 120,000. She is single
and
Over thePhpamount
140,000of but
her not
nontaxable income
Php 22,500 is Phpof the
+ 25% So, the amount of tax due is Php 4,150
18,000. What is
over Php 250,000 her tax due? excess over Php 140,000
Gross Compensation Income Php 214,000
Over Php 250,000 but not Php 50,000 + 30% of the
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over Php 500,000 excess over Php 250,000

Over Php 500,000 Php 125,000 + 32% of the

excess over Php 500,000
BUSINESS MATH - MIDTERM

Tax Due Php 24,000

Less   Tax Withheld Php 18,000
Nontaxable income (SSS, Php 23,000 Tax Payable Php 6,000
Philhealth, Pagibig)
Since her tax due is greater than her tax withheld,
Personal Exemption Php 50,000 Eva Diolola needs to pay Php 6,000 as income tax.
Additional Exemption Php 100,000 Example 4

Taxable Income Php 41,000 Yolanda Roberto is a government employee with a

taxable income of Php 204,000. Determine if she has
tax payable or tax refundable, given that the amount
Tax payable or tax refundable of her tax withheld is Php 48,000

Recall that employers deduct withholding tax from Step 1: Compute her tax due based on the taxable
employees’ compensation every pay period. In a way, income
the withholding tax is the payment of tax in Tax due = 22,500 + 0.25 (204,000-140,000) = 38,500
installment basis. At the end of the year, after
computing the tax due, the employer determines Step 2: Subtract tax withheld from tax due
whether the employee has to pay additional tax or the
Taxable Income Php 204,000
employee shall get a tax refund based on tax
withheld. Tax due Php 38,500
The following guidelines are helpful in determining
Tax Withheld Php 48,000
whether the employee has a tax payable or tax
refundable Tax Payable -Php 9,500
• If tax due is greater than tax withheld, then
income tax is payable (TD > TW = Tax
Payable) Since tax due is less than tax withheld, Yoland
Roberto has a tax refund of Php 9,500.
• If tax due is equal to tax withheld, then no
income tax is payable (TD = TW, NO Tax
Payable)
• If tax due is less than tax withheld, ten income
tax is refundable (TD < TW = Tax Refundable)
Example 3
Eva Diolola is an employee of a private company with
a taxable income of Php 146,000. Determine if she has
tax payable or tax refundable, given that the amount
of her tax withheld is Php 18,000
Step 1: Compute her tax due based on the taxable
income.
Tax due = 22,500 + 0.25 (146,000-140,000) = 24,000
Step 2: Subtract tax withheld from tax due

Taxable Income Php 146,000 Example 5

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Willie Yap is a private sales clerk in Aviola Company in

Metro Manila. He has a gross monthly salary of Php
19,000. He is married with 2 dependent children.
Compute for the following: c.)
a) Computer for his monthly Net Pay
b) Compute his Tax due Taxable Income Php 116,974.40
c) Will willie receive a tax refund or tax payable?
Tax Due Php 17,894.88
Tax Withheld Php 17,894.04
a) Thus, Willie Yap receives a net pay of Php
16,590.03 Tax Payable Php 0.84

Gross Pay Php 19,000

Since her tax due is greater than his tax withheld, Will
Less: Nontaxable
Yap needs to pay Php 0.84 as income tax
Income
SSS contribution Php 581.30
Philhealth contribution Php 237.50
HDMF contribution Php 100
Taxable Income Php 18,081.20
Less: Withholding tax Php1,491.17
Net Pay Php 16,590.03

b.)

Gross Compensation Income Php 228,000

Less:
Nontaxable income (SSS, Php 11,025.60
Philhealth, Pag-ibig)
Personal Exemption Php 50,000
Additional Exemption Php 50,000
Taxable Income Php 116,974.40

So, the amount of taxable income is Php 116,974.40

Tax due = 8,500 + .20(116,974.40-70,000) = Php
17,894.88

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