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4.S: Summary

  • Page ID
    22086
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    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

    The amount of income for which the wage earner is granted a tax exemption.

    commission

    An amount or a fee paid to an employee for performing or completing some form of transaction.

    consumer price index

    A measure of the average price of a typical Canadian market basket, which is used to estimate inflation in Canada.

    graduated commission

    A form of compensation where an employee is offered increasing rates of commission for higher levels of performance.

    gross earnings

    The amount of money earned before any deductions are removed from a paycheque.

    holiday earnings

    Earnings paid to an employee on a statutory holiday for which no work is performed..

    hourly wage

    A variable compensation based on the time an employee has worked.

    index

    A number used to compare two quantities sharing the same characteristic as measured under different circumstances.

    index number

    The expression of a relationship between two quantities; it is a result of an index calculation.

    market basket

    The average price of the goods and services that a typical Canadian household commonly purchases; used in calculating the consumer price index.

    overtime

    Work time in excess of an employee’s regular workday or regular workweek.

    overtime or premium earnings

    Earnings determined by an employee’s overtime rate of pay and that occur when regular hours are exceeded.

    personal income tax

    A tax on earned income that is levied by both the federal and provincial/territorial governments.

    piecework

    A form of compensation where an employee is paid on a per-unit basis.

    progressive tax system

    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

    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

    The amount of goods and services that can be purchased with a dollar.

    real income

    Income that has the effects of inflation removed from its amount.

    regular earnings

    Earnings determined by an employee’s regular rate of pay.

    S&P/TSX Composite Index

    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

    A fixed compensation paid to a person on a regular basis for services rendered.

    salary plus commission

    A form of compensation in which gross earnings combine a basic salary together with commissions on transactions.

    statutory holiday

    A legislated day of rest with pay.

    statutory holiday worked earnings

    Earnings paid to an employee on a statutory holiday at a premium rate for working on the statutory holiday.

    straight commission

    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.

    Contributors and Attributions


    This page titled 4.S: Summary is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Jean-Paul Olivier via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.