Question

Fiona, a regional sales manager, works from her office in State U. Her region includes several states, as indicated in the sales report below. Fiona is compensated through straight commissions on the sales in her region and a fully excludible cafeteria plan conveying various fringe benefits to her. Determine how much of Fiona’s $250,000 commissions and $75,000 fringe benefit package is assigned to the payroll factor of State U.

State	Sales Generated	Fiona’s Time Spent There
U	$3,000,000	20%
V	4,000,000	50%
X	8,000,000	30%

Answer 1

Fiona, a regional sales manager, works from her office in State U.

Commission should be assigned according to sales generated in states and Fringe benefit package according to Time spend in state

Calculation of payroll factor of State U

• Commissions of $ 250,000 –

Total in States = $ 3,000,000 + $ 4,000,000 + $ 8,000,000

= $ 15,000,000

Part of State U = $ 250,000*(Sales Generated in State U/ Total Sales Generated in States)

= $ 250,000*($ 3,000,000/ $ 15,000,000)

= $ 50,000

• Fringe benefit Package of $75,000 –

Part of State U = $ 75,000* Fiona’s Time Spent in state U

= $ 75,000*20%

= $ 15,000

Total payroll factor of State U = $ 50,000 + $ 15,000

= $ 65,000