Question

1. pauline is a restaurant manager who earns $7,500 a month before deductions. the following amounts are deducted from her pay:

• income tax: $1,500
• cpp and employment insurance: $330
• group insurance coverage: $240
• dcpp: $310

paulines spouse is employed and 50% of paulines income will be required for her family to maintain their current lifestyle if she dies. what is the annual amount based on which paulines life insurance coverage should be determined?
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a. $41,210
b. $30,720
c. $28,490
d. $44,000

Explanation:

Step1: Calculate net monthly income

First, find Pauline's net monthly income by subtracting all deductions from her gross monthly income.
Gross monthly income = $7,500
Total deductions = Income tax + CPP and EI + Group Insurance + DCPP = $1,500 + $330 + $240 + $310 = $2,380
Net monthly income = $7,500 - $2,380 = $5,120

Step2: Determine monthly required income for family

50% of her net monthly income is required for the family. So, monthly required = 0.5 * $5,120 = $2,560

Step3: Calculate annual amount

To find the annual amount, multiply the monthly required by 12.
Annual amount = $2,560 * 12 = $30,720

Wait, wait, maybe I made a mistake. Wait, the problem says "50% of Pauline's income will be required". Wait, maybe "income" here is the gross or net? Wait, let's re - check.

Wait, the problem says "Pauline is a restaurant manager who earns $7,500 a month before deductions". Then "50% of Pauline's income will be required for her family to maintain their current lifestyle if she dies". Wait, maybe "income" here is her take - home pay? Wait, no, maybe I misread the deductions. Wait, let's recalculate the net income correctly.

Wait, gross monthly: $7,500
Deductions:
Income tax: $1,500
CPP and EI: $330
Group Insurance: $240
DCPP: $310
Total deductions: 1500 + 330+240 + 310=1500 + 330 is 1830, 1830+240 = 2070, 2070+310 = 2380. So net income is 7500 - 2380 = 5120. Then 50% of net income: 0.55120 = 2560 per month. Annual: 256012 = 30720. Which is option b.

Wait, but let's check again. Alternatively, maybe the "income" referred to is the gross? But that doesn't make sense because deductions are taken out. Wait, the problem says "50% of Pauline's income will be required". If "income" is her gross monthly income: 75000.5 = 3750 per month. Annual: 375012 = 45000, which is not an option. So it must be net. So 51200.5 = 2560, 256012 = 30720, which is option b.

Answer:

b. $30,720