Question

1. Calculate overhead costs for a Chris, who earns $12/hour milking cows for Snohomish Dairies. Here are the details:

• She works 10 hours per day, 6 days per week, 52 weeks per year (2 weeks are provided for sick leaves, vacation and personal leave)
• She is married, age 45 and has two children
• The health insurance premium is $800/month and is paid by Snohomish
• Life insurance is $0.20 per month per $1000 of coverage. Snohomish provides $50,000 of coverage and Chris elects to pay for another $50,000 out of her salary.
• Short-term and long-term disability insurance is 2% of salary, paid by Snohomish
• Workers' compensation insurance is $1.2859 per hour worked (include the two weeks of leave time as hours worked). The experience rating factor is 0.95
• Social security is 6.2% paid by Snohomish and 6.2% paid by Chris. These apply to the first $128,700 of income
• Medicare/Medicaid is 1.45% paid by Chris and 1.45% paid by Snohomish
• Retirement is 5% deducted from Chris’ salary with a 5% match from Snohomish
• Federal unemployment tax is 0.6% of the first $7,000 of salary
• To simplify the calculations, assume federal income tax is 10% of Chris’ base income
• Assume State income tax is 3% of Chris’ base income
• State unemployment tax is 2% of the first $47,300 of salary
• Chris elects to put $150/month from his salary into a Health Savings Account

1. Calculate the total cost of payroll expenses (aside from salary) paid by Snohomish Dairies and Chris.

2. Calculate the percentage that these expenses are of the total salary.

3. Calculate Chris’ total cost to Snohomish Dairies (salary + benefits) and Chris’ net income after taxes and benefit withholdings

4. If you were the manager of this dairy, what would you focus on to lower Chris’ overall cost to the operation?

Answer 1

Calculation of total cost of pay roll expenses(Aside of Salary)
Description	Qty.	Rate	Amount
Health Insurance premium	12	800	9600
Life insurance	12	10	120
Short term and Long Term disability			748.8
Workers' compensation insurance			4012.008
Social Security @ 6.20%			2321.28
Medicare/Medicaid@ 1.45%			542.88
Retairment @ 5%			1872
Federal unemployment tax			42
Total cost of pay roll expenses(Aside of Salary)			19258.968

Calculate the percentage that these expenses are of the total salary.

= 19258.968 / 56698.97 * 100

= 33.97%

Description	Qty.	Rate	Amount
Pay roll expenses	3120	12	37440
Health Insurance premium	12	800	9600
Life insurance	12	10	120
Short term and Long Term disability			748.8
Workers' compensation insurance			4012.008
Social Security @ 6.20%			2321.28
Medicare/Medicaid@ 1.45%			542.88
Retairment @ 5%			1872
Federal unemployment tax			42
Total Cost to Snohomish Dairies			56698.968
Federal income Tax @ 10%			3744
State income tax @ 3%			1123.2
State unemloyment tax @ 2%			946
Net Income after taxes			50885.768
Note : Health savins account deduction is not considered since it is not a tax

If I am the manager of the company, I will focus on, how to get the more output from the Cris within his 10 hrs time. All others are statutory requirement and cannot be avoided.