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An employee earns gross pay of $4,000 per month. After adding the employer's matched Social Security and Medicare ($306) plus federal and state unemployment taxes ($248), what is the total monthly cost of this employee to the company?
A$4,000
B$4,306
C$4,248
D$4,554
Answer & Solution
Correct answer: D. $4,554
1. The company's cost is gross pay plus all employer payroll taxes it must absorb.
2. Gross pay: $4,000.
3. Employer Social Security + Medicare match: $306.
4. Employer federal + state unemployment: $248.
5. Total cost: \$4{,}000 + \$306 + \$248 = \$4{,}554.
6. Option B adds only the match and B/C each omit one tax category; only D includes all employer taxes.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.2 "Payroll", p.213_
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