Trayne Corporation's sales office and manufacturing plant are located in State X. Trayne also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, X defines payroll as all compensation paid to employees, including elective contributions to § 401(k) deferred compensation plans. Under the statutes of W, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Trayne incurred the following personnel costs. Trayne's payroll factor for State X is:

Question

Trayne Corporation's sales office and manufacturing plant are located in State X. Trayne also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, X defines payroll as all compensation paid to employees, including elective contributions to § 401(k) deferred compensation plans. Under the statutes of W, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Trayne incurred the following personnel costs.  Trayne's payroll factor for State X is:

Quizplus · Accepted Answer

According to the question, only compensation paid to employees, including elective contributions to § 401(k) deferred compensation plans, are included in the payroll factor for State X. Therefore, we need to exclude the compensation paid to officers and contributions to § 401(k) plans from the total personnel costs.

Total personnel costs = $1,800,000 + $400,000 + $50,000 = $2,250,000

Compensation paid to officers = $400,000

Personnel costs for payroll factor calculation = Total personnel costs - Compensation paid to officers = $2,250,000 - $400,000 = $1,850,000

Payroll factor = (Payroll in State X / Total Payroll) x 100%

Payroll in State X = $1,200,000

Total Payroll = $1,800,000 + $400,000 + $250,000 + $50,000 = $2,500,000

Payroll factor = ($1,200,000 / $2,500,000) x 100% = 48%

Therefore, Trayne's payroll factor for State X is 66.67% (option B), as compensation paid to officers and contributions to § 401(k) plans are excluded from the payroll factor calculation in State W but included in State X.

Trayne Corporation's Sales Office and Manufacturing Plant Are Located in State