Creating a Hypothetical Budget – Portfolio Activity Expense Rent (monthly) Telephone (monthly) Groceries (weekly) Clothing (monthly with % job related) Water & Electric (monthly) Weekly Dinner & Movie Amount $657.00 $56.34 $56.00 $106.00 $98.87 $40.00 You are paid $11.75/hr. You work 40 hr./wk. Your deductions are FICA (7.65%), Federal tax withholding (10.75%), and state tax withholding (7.5%) 1) Assuming you budget a month as 4 weeks, how much is your total realized income, fixed expenses, and discretionary expenses. 2) If you are able to work 20 hours of overtime the next month and are paid 1.5 times your regular rate, how does this change your budget for that month? 3) How much can you put towards savings each month if you eliminated your discretionary expenses? Be sure to include in your response:
• A detailed budget showing income and expenses for the two different months.
• Answers to the original questions. Be sure to include in your response:
• A detailed budget showing income and expenses for the two different months. Answers to the original questions.
• An explanation for how you calculated the first 40 hours of income and then the additional 20 hours of overtime. Month 1 Realized Income: Amount Total Income Expense (Fixed):
Amount Total Expenses (Fixed) . Expense (Discretionary): Total Expenses (Discretionary) Total Expenses (Fixed & Discretionary): Month 2 Realized Income: Amount Total Income Expense (Fixed): Amount Total Expenses (Fixed) Expense (Discretionary): Total Expenses (Discretionary) Total Expenses (Fixed & Discretionary):
The Correct Answer and Explanation is :
Detailed Budget Analysis
Month 1:
Realized Income:
- Gross Income: 11.75/hour × 40 hours/week × 4 weeks = $1,880.00
Fixed Expenses: - Rent: 657.00- Telephone: 56.34 × 4 weeks = $225.36- Groceries: 56.00 × 4 weeks = $224.00- Clothing: 106.00- Water & Electric: 98.87
Discretionary Expenses: - Weekly Dinner & Movie: 40.00 × 4 weeks = $160.00
Total Expenses: - Fixed Expenses Total: 657.00 + $225.36 + $224.00 + $106.00 + $98.87 = $1,311.23- Discretionary Expenses Total: 160.00- Overall Expenses: 1,311.23 + $160.00 = $1,471.23
Net Income: - Net Income: 1,880.00 (Gross Income) – $1,471.23 (Total Expenses) = $408.77
Month 2 (with 20 hours of overtime):
Overtime Compensation:
- Overtime Rate: 11.75/hour × 1.5 = $17.625/hour- Overtime Earnings: 17.625/hour × 20 hours = $352.50
Adjusted Gross Income: - New Gross Income: 1,880.00 (Original Gross) + $352.50 (Overtime) = $2,232.50
Adjusted Total Expenses: - Fixed Expenses Total: 1,311.23 (unchanged)- Discretionary Expenses Total: 160.00 (unchanged)- Overall Expenses: 1,311.23 + $160.00 = $1,471.23 (unchanged)
Net Income: - Net Income: 2,232.50 (New Gross Income) – $1,471.23 (Total Expenses) = $761.27
Savings Potential: - Savings Without Discretionary Expenses: 2,232.50 (New Gross Income) – $1,311.23 (Fixed Expenses) = $921.27
Explanation:
- Month 1: – Gross Income: alculated by multiplying the hourly wage by the standard weekly hours and then by 4 weeks. – Fixed Expenses: ummed up all monthly fixed costs. – Discretionary Expenses: alculated weekly expenses and multiplied by 4. – Total Expenses: ombined fixed and discretionary expenses. – Net Income: ubtracted total expenses from gross income.
- Month 2 (with Overtime): – Overtime Compensation: alculated by multiplying the overtime hourly rate by the overtime hours worked. – Adjusted Gross Income: dded overtime earnings to the original gross income. – Adjusted Total Expenses: ssumed no change in expenses. – Net Income: ubtracted total expenses from adjusted gross income.
- Savings Potential: – Without Discretionary Expenses: alculated by subtracting fixed expenses from adjusted gross income.
Conclusion:
- Month 1: et income of $408.77.- Month 2 (with Overtime): et income increases to $761.27.- Savings Potential: ithout discretionary expenses, potential savings of $921.27.
y eliminating discretionary expenses, you can significantly increase your monthly savings.