Let's break down the calculation for CPP (Canada Pension Plan) contributions based on the information given: **Given:** - Ram's employment income = $46,000 - YMPE (Year's Maximum Pensionable Earnings) = $61,600 - YBE (Year's Basic Exemption) = $3,500 - CPP contribution rate (2023 and 2024) = **5.95%** ### Step 1: Calculate Pensionable Earnings \[ \text{Pensionable Earnings} = \min(\text{Income},\, \text{YMPE}) - \text{YBE} \] \[ = \min(46,000, 61,600) - 3,500 = 46,000 - 3,500 = 42,500 \] ### Step 2: Calculate Employee CPP Contribution \[ \text{CPP Contribution} = \text{Pensionable Earnings} \times \text{CPP Rate} \] \[ = 42,500 \times 0.0595 = 2,528.75 \] Rounded to the nearest dollar, that's **$2,528**. --- ### **Answer:** **D. $2,528**

Introduction: The calculation of employee contributions to the Canada Pension Plan (CPP) is a fundamental aspect of payroll deductions in Canada. CPP contributions are mandatory for employed individuals earning above a certain threshold and are calculated based on pensionable earnings, which are subject to specific limits and exemptions. The key parameters involved include the Year's Maximum Pensionable Earnings (YMPE), which caps the maximum earnings subject to CPP contributions, and the Year's Basic Exemption (YBE), a threshold amount not subject to contributions. The contribution rate, set annually, determines the proportion of pensionable earnings that must be contributed by both employees and employers. Understanding how to accurately compute these contributions involves identifying the pensionable earnings within the specified limits and applying the correct rate. This process ensures compliance with statutory requirements and proper calculation of deductions from payroll. Explanation: The introduction emphasizes the importance of understanding the components involved in calculating CPP contributions—namely, pensionable earnings, YMPE, YBE, and the contribution rate. It establishes the relevance of these parameters in determining the correct deduction amount, providing a conceptual framework necessary for precise calculation. --- Identifying the Correct Option Among The Choices: The correct choice from the provided options is **D. $2,528**. Explanation: This option is correct because it aligns with the standard CPP contribution calculation process for the given income level. The calculation involves determining pensionable earnings by subtracting the YBE from the lesser of actual earnings and YMPE, then multiplying by the contribution rate. The other options do not match the calculated contribution based on these parameters. --- Step-by-Step Calculation: **Step 1: Determine Pensionable Earnings** - The pensionable earnings are calculated as the lesser of the actual income and the YMPE, minus the YBE: \[ \text{Pensionable Earnings} = \min(\text{Income},\, \text{YMPE}) - \text{YBE} \] - Given: - Income = $46,000 - YMPE = $61,600 - YBE = $3,500 - Calculation: \[ \text{Pensionable Earnings} = \min(46,000, 61,600) - 3,500 = 46,000 - 3,500 = 42,500 \] *Explanation:* Since Ram's income ($46,000) is less than the YMPE, only $46,000 is considered for pensionable earnings. Subtracting the YBE accounts for the exempted portion, leaving $42,500 as the earnings subject to CPP deductions. **Step 2: Apply the CPP Contribution Rate** - The contribution rate for CPP (2023/2024) is 5.95%. \[ \text{CPP Contribution} = \text{Pensionable Earnings} \times \text{Rate} \] - Calculation: \[ 42,500 \times 0.0595 = 2,528.75 \] *Explanation:* Multiplying the pensionable earnings by the contribution rate yields the amount Ram's employer deducts for CPP. The precise amount is $2,528.75, which rounds to $2,528. **Step 3: Final Deduction Amount** - Rounding to the nearest dollar: \[ \boxed{\$2,528} \] *Explanation:* The rounding aligns with typical payroll practices, and the calculated deduction matches option D. --- Analysis of why other Options are Incorrect: - **Option A: $4,632** — This exceeds the calculated contribution and likely corresponds to a scenario with higher income or different parameters, not applicable here. - **Option B: $3,500** — This amount may represent the YBE or a mistaken calculation, not the actual deduction. - **Option C: $1,158** — Significantly lower than the correct calculation, possibly representing partial contributions or misinterpretation of the parameters. *Explanation:* Each incorrect option either overstates or understates the contribution based on incorrect assumptions or calculations. The precise calculation based on the provided parameters confirms that $2,528 is the accurate deduction. --- **Conclusion:** The correct CPP contribution deduction from Ram's pay, based on his income of $46,000, the YMPE of $61,600, the YBE of $3,500, and the contribution rate of 5.95%, is **$2,528**. This aligns with option D. Accurate computation involves identifying pensionable earnings within statutory limits and applying the current contribution rate, ensuring compliance with payroll deduction standards.