Question

Required information The following information applies to the questions displayed below) Nital, who is single and has no dependents, was planning on spending the weekend repairing his car. On Friday, Nita's employer called and offered him $100 in overtime pay if he would agree to work over the weekend. Nitai could get his car repaired over the weekend at Autofix for $64. If Nitai works over the weekend, he will have to pay the $64 to have his car repaired but he will earn $100. Assume Nitai pays tax at a flat 12 percent rate. (Do not round intermediate calculations. Round your answers to 2 decimal places.) a-1. Strictly considering tax factors, should Nital work or repair his car if the $64 he must pay to have his car fixed is not deductible? O Work O Repair .-2. Given the answer in a-1 above, by how much is Nitai better or worse off?

Answer 1

Answer:

Nitai should work over the weekend.

Because according to the situation, if he works over the weekend, he will get $500. After deducting the tax, he would still have surplus amount to get his car repaired from the workshop. The offer is profitable, so he should go for the overtime option.

Now how he would have the surplus, following is the calculation

Overtime payment = $100

Tax percentage= 12%

Tax that he has to pay: 100*0.12= $12

Amount earned= $100 - $12= $88

Car Repairing Expense= $64

So, Amount in hand - Expenses = $88 - $64 = $24 (Surplus)

So this is the amount, he would still have in hand, if he works on the weekend.

Thank you.