Dan is promoted to salary level 2, receives a 2% cost-of-living increase and a 10% merit bonus. What is Dan's new salary?
Answer (2)
Calculate the cost-of-living increase: 0.02 × $56 , 000 = $1 , 120 .
Calculate the salary after the cost-of-living increase: $56 , 000 + $1 , 120 = $57 , 120 .
Calculate the merit bonus: 0.10 × $57 , 120 = $5 , 712 .
Calculate the final salary: $57 , 120 + $5 , 712 = $62 , 832 .
Explanation
Determine Starting Salary First, we need to determine Dan's starting salary. According to the table, Dan's salary at level 2 is $56,000.
Calculate Cost-of-Living Increase Next, we calculate the cost-of-living increase. This is 2% of his current salary. So, the increase is: 0.02 × $56 , 000 = $1 , 120
Calculate Salary After Cost-of-Living Increase Now, we add this increase to his original salary to find his salary after the cost-of-living adjustment: $56 , 000 + $1 , 120 = $57 , 120
Calculate Merit Bonus Then, we calculate the merit bonus. This is 10% of his salary after the cost-of-living increase. So, the bonus is: 0.10 × $57 , 120 = $5 , 712
Calculate Final Salary Finally, we add the merit bonus to his salary after the cost-of-living increase to find his new salary: $57 , 120 + $5 , 712 = $62 , 832
State the Final Answer Therefore, Dan's new salary is $62,832.
Examples
Understanding percentage increases is crucial in many real-life situations, such as calculating salary raises, investment returns, or price increases. For example, if you invest $1,000 in a stock that increases by 5% in the first year and then increases by 10% in the second year, you can calculate the final value of your investment using the same principles. First year increase: $1000 * 0.05 = $50, new value: $1000 + $50 = $1050. Second year increase: $1050 * 0.10 = $105, final value: $1050 + $105 = $1155. This shows how successive percentage increases can significantly impact the final amount.
Dan's new salary is $62,832 after receiving a 2% cost-of-living increase and a 10% merit bonus on his adjusted salary. Initially set at $56,000, Dan's salary increased to $57,120 after the cost-of-living increase, followed by a merit bonus of $5,712. The final total of his salary is therefore $62,832.
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