Question

Calculate Payroll

Breakin Away Company has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee:

	Consultant		Computer Programmer		Administrator
Regular earnings rate	$3,010 per week		$28 per hour		$40 per hour
Overtime earnings rate	Not applicable		1.5 times hourly rate		2 times hourly rate
Number of withholding allowances	3		2		1

For the current pay period, the computer programmer worked 60 hours and the administrator worked 50 hours. The federal income tax withheld for all three employees, who are single, can be determined by adding $356.90 to 28% of the difference between the employee's amount subject to withholding and $1,796.00. Assume further that the social security tax rate was 6%, the Medicare tax rate was 1.5%, and one withholding allowance is $70.

Determine the gross pay and the net pay for each of the three employees for the current pay period. Assume the normal working hours in a week are 40 hours. If required, round your answers to two decimal places.

	Consultant	Computer Programmer	Administrator
Gross pay	$	$	$
Net pay	$	$	$

Answer 1

Solution

Calculation for Gross Pay

# Consultant ;-

Gross Pay = Regular Pay + Overtime Pay

= $ 3,010 + Nil   

Gross Pay = $ 3,010

# Computer Programmer

Gross Pay = Regular Pay + Overtime Pay

( $ 28 * 40hrs ) + ( $ 28 * 20 hrs *  1.5)

= $ 1,120 + $ 840 = $ 1,960

Gross Pay = $ 1,960

Administrator

Gross Pay = Regular Pay + Overtime Pay

= ($40*40 hrs) + ($40*$10*2)

= $ 1,600 + $ 800

Gross Pay = $ 2,400

2. Calculation of Net Pay

# Consultant

Particulars	Amount
Gross Pay	$ 3,010
Less : Deduction
Federal Income Tax Withholding	($638.02)
Social Security Tax ( $ 3,010 * 6 % )	($180.60)
Medicare Tax ( $ 3,010 * 1.5 % )	($ 45.15)
Net Pay	$ 2,146.23

Computer Programmer

Particulars	Amount
Gross Pay	$ 1,960
Less : Deduction
Federal Income Tax Withholding	($363.62)
Social Security Tax ($1960 * 6 % )	($117.4)
Medicare Tax ( $ 1960 * 1.5 % )	($29.4)
Net Pay	$1,449.38

Administrator

Particulars	Amount
Gross Pay	$ 2,400
Less : Deduction
Federal Income Tax Withholding	($506.42)
Social Security Tax ($2,400 * 6 % )	($ 144)
Medicare Tax ( $ 2,400* 1.5 % )	($36)
Net Pay	$1,713.58

Working Note ;-

Calculation of Federal Income Tax Withholding

Particulars	Consultant	Computer Programmer	Administrator
Gross weekly Pay	$ 3,010	$ 1,960	$ 2,400
No.of withholding Allowance	3	2	1
Value of One Allowance	$70	$70	$70
Amount to be deducted	$ 210	$ 140	$70
Amount Subject to withholding	$2,800	$1,820	$2,330
Initial withholding	$356.90	$356.90	$356.90
Bracket 28% Over Bracket Excess	($2800 - $ 1,796)*28%	($1,820 - $ 1,796)*28%	($2,330 - $ 1,796)*28%
	$ 281.12	$6.72	$149.52
Amount Withheld	$638.02 (356.9+281.12)	$363.62 (356.9+6.72)	$506.42 (356.9+149.52)

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