4.S: Summary
- Page ID
- 22086
Key Concepts Summary
4.1: Gross Earnings (Off to Work You Go)
- Calculating salary and hourly gross earnings
- Discussion of employment contract characteristics for salary and hourly earners
- Calculating commission gross earnings
- Calculating piecework gross earnings
4.2: Personal Income Tax (The Taxman Taketh)
- Provision of 2013 federal and provincial/territorial tax brackets and corresponding tax rates
- Calculation of income taxes
4.3: Indexes (The Times Are Changing)
- What is an index and how is it calculated?
- Specialty indexes, including the consumer price index and the S&P/TSX Composite Index
- Using the CPI to calculate the purchasing power of a dollar
- Using the CPI to calculate real income
The Language of Business Mathematics
- basic personal amount
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The amount of income for which the wage earner is granted a tax exemption.
- commission
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An amount or a fee paid to an employee for performing or completing some form of transaction.
- consumer price index
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A measure of the average price of a typical Canadian market basket, which is used to estimate inflation in Canada.
- graduated commission
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A form of compensation where an employee is offered increasing rates of commission for higher levels of performance.
- gross earnings
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The amount of money earned before any deductions are removed from a paycheque.
- holiday earnings
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Earnings paid to an employee on a statutory holiday for which no work is performed..
- hourly wage
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A variable compensation based on the time an employee has worked.
- index
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A number used to compare two quantities sharing the same characteristic as measured under different circumstances.
- index number
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The expression of a relationship between two quantities; it is a result of an index calculation.
- market basket
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The average price of the goods and services that a typical Canadian household commonly purchases; used in calculating the consumer price index.
- overtime
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Work time in excess of an employee’s regular workday or regular workweek.
- overtime or premium earnings
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Earnings determined by an employee’s overtime rate of pay and that occur when regular hours are exceeded.
- personal income tax
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A tax on earned income that is levied by both the federal and provincial/territorial governments.
- piecework
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A form of compensation where an employee is paid on a per-unit basis.
- progressive tax system
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A personal income tax system where the tax rate increases as the amount of income increases; however, the increased tax rates apply only to income amounts above a minimum threshold.
- public holiday
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A provincially recognized day for which employees may or may not get a day of rest and may or may not receive pay depending on provincial employment standards.
- purchasing power of a dollar
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The amount of goods and services that can be purchased with a dollar.
- real income
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Income that has the effects of inflation removed from its amount.
- regular earnings
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Earnings determined by an employee’s regular rate of pay.
- S&P/TSX Composite Index
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This index captures the equity prices of approximately 200 of Canada's largest companies on the Toronto Stock Exchange as measured by their market capitalization, representing approximately 70% of the Canadian market capitalization listed on the TSX.
- salary
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A fixed compensation paid to a person on a regular basis for services rendered.
- salary plus commission
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A form of compensation in which gross earnings combine a basic salary together with commissions on transactions.
- statutory holiday
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A legislated day of rest with pay.
- statutory holiday worked earnings
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Earnings paid to an employee on a statutory holiday at a premium rate for working on the statutory holiday.
- straight commission
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A form of compensation where the employee's entire earnings are based on dollar transactions and calculated strictly as a percentage of the total transactions.
The Formulas You Need to Know
Symbols Used
\(CPI\) = consumer price index
\(GE\) = gross earnings
\(PPD\) = purchasing power of a dollar
\(RI\) = real income
Formulas Introduced
Formula 4.1 Salary and Hourly Gross Earnings:
\[\text { GE }=\text { Regular Earnings }+\text { Overtime Earnings }+\text { Holiday Earnings }+\text { Statutory Holiday Worked Earnings}\nonumber \]
Formula 4.2 Annual Income Tax:
\[\text { Income Tax}=\sum(\text { Eligible Income in Tax Bracket } \times \text { Tax Bracket Rate })\nonumber \]
Formula 4.3 Index Numbers: \(\text { Index Number }=\dfrac{\text { Chosen quantity }}{\text { Base quantity }} \times \text { Base value }\)
Formula 4.4: Purchasing Power of a Dollar: \(PPD=\dfrac{\$1}{CPI / 100}\)
Formula 4.5: Real Income: \(RI=\dfrac{\text { Nominal Income }}{CPI / 100}\)
Technology
Calculator
The percent change (\(\Delta \%\)) function is used in this chapter. See the end of Chapter 3 for a full discussion of this function.