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	$2,410 per week		$36 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

Answer -

	Consultant	Computer programmer	Administrator
Gross pay	$2,410	$2,520	$2,400
Net pay	$1,759.23	$1,810.58	$1,713.58

Calculation:

Consultant:

1. Gross pay:

= Regular earnings + Overtime earnings

= $2410 + N.A.

= $2410

2. Federal income tax withheld:

Amount subject to withholding = Gross pay - (Number of withholding allowances * One withholding allowance)

= $2410 - (3 withholding allowances * $70)

= $2200

Federal income tax withheld:

= $356.90 + [28% * ($2200 - $1796)]

= $470.02

3. Social security tax:

= Gross pay * 6%

= $2410 * 6%

= $144.60

3. Medicare tax:

= Gross pay * 1.5%

= $2410 * 1.5%

= $36.15

4. Net pay:

= Gross pay - Federal income tax withheld - Social security tax - Medicare tax

= $2410 - $470.02 - $144.60 - $36.15

= $1759.23

Computer programmer:

Regular earnings = Normal working hours * Regular earning rate

= 40 hours * $36 per hour

= $1440

Overtime earnings = Excess of normal working hours * Overtime earnings rate

= (60 hours - 40 hours) * ($36 per hour * 1.5 times)

= $1080

Gross pay:

= Regular earnings + Overtime earnings

= $1440 + $1080

= $2520

2. Federal income tax withheld:

Amount subject to withholding = Gross pay - (Number of withholding allowances * One withholding allowance)

= $2520 - (2 withholding allowances * $70)

= $2380

Federal income tax withheld:

= $356.90 + [28% * ($2380 - $1796)]

= $520.42

3. Social security tax:

= Gross pay * 6%

= $2520 * 6%

= $151.20

3. Medicare tax:

= Gross pay * 1.5%

= $2520 * 1.5%

= $37.80

4. Net pay:

= Gross pay - Federal income tax withheld - Social security tax - Medicare tax

= $2520 - $520.42 - $151.20 - $37.80

= $1810.58

Administrator:

Regular earnings = Normal working hours * Regular earning rate

= 40 hours * $40 per hour

= $1600

Overtime earnings = Excess of normal working hours * Overtime earnings rate

= (50 hours - 40 hours) * ($40 per hour * 2 times)

= $800

Gross pay:

= Regular earnings + Overtime earnings

= $1600 + $800

= $2400

2. Federal income tax withheld:

Amount subject to withholding = Gross pay - (Number of withholding allowances * One withholding allowance)

= $2400 - (1 withholding allowance * $70)

= $2330

Federal income tax withheld:

= $356.90 + [28% * ($2330 - $1796)]

= $506.42

3. Social security tax:

= Gross pay * 6%

= $2400 * 6%

= $144

3. Medicare tax:

= Gross pay * 1.5%

= $2400 * 1.5%

= $36

4. Net pay:

= Gross pay - Federal income tax withheld - Social security tax - Medicare tax

= $2400 - $506.42 - $144 - $36

= $1713.58