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The following unemployment tax rate schedule is in effect for the calendar year 2020 in State A, which uses the reserve-ratio formula in determining employer contributions: Reserve Ratio Contribution Rate 0
The following unemployment tax rate schedule is in effect for the calendar year 2020 in State A, which uses the reserve-ratio formula in determining employer contributions:
| Reserve Ratio | Contribution Rate |
| 0.0% or more, but less than 1.0% | 6.7% |
| 1.0% or more, but less than 1.2% | 6.4% |
| 1.2% or more, but less than 1.4% | 6.1% |
| 1.2% or more, but less than 1.4% | 5.8% |
| 1.6% or more, but less than 1.8% | 5.5% |
| 1.8% or more, but less than 2.0% | 5.2% |
| 2.0% or more, but less than 2.2% | 4.9% |
| 2.2% or more, but less than 2.4% | 4.6% |
| 2.4% or more, but less than 2.6% | 4.3% |
| 2.6% or more, but less than 2.8% | 4.0% |
| 2.8% or more, but less than 3.0% | 3.7% |
| 3.0% or more, but less than 3.2% | 3.4% |
| 3.2% or more | 3.1% |
Conrad Company, which is located in State A, had an average annual payroll of $1,150,000 for the three 12-month periods ending on June 30, 2019 (the computation date for the tax year 2020). As of June 30, 2019 the total contributions that had been made to Conrad Company's reserve account, in excess of the benefits charged, amounted to $21,560. Compute:
b. 2020 contribution rate for the company ......................................................... _____________________%
Expert Solution
First we calculate Company's Reserve Ratio for 2020:
Reserve Ratio = Contribution/Average Annual Payroll
= $21,560/$1,150,000
Reserve Ratio = 1.87%
Now we calculate 2020 Contribution Rate for Company:
Contribution Rate = 1.8% or more, but less than 2.0% = 5.2%
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