The estimated medical costs are expected to be $7,500 during an employee's retirement. The retiree is expected to pay 30% of the cost and Medicare is expected to pay 50% of the cost. What is the company's estimated net cost of benefits?

Question

Quizplus · Accepted Answer

The estimated net cost to the company can be calculated as follows: 
Total cost = $7,500 
Retiree pays 30% = $7,500 x 0.30 = $2,250 
Medicare pays 50% = $7,500 x 0.50 = $3,750 
Net cost to the company = Total cost - Retiree contribution - Medicare contribution 
= $7,500 - $2,250 - $3,750 
= $1,500 
Therefore, the company's estimated net cost of benefits is $1,500, which is option C.

The Estimated Medical Costs Are Expected to Be $7,500 During