Question

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	$2,110 per week		$36 per hour		$50 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

Answer 1

	Consultant	Computer Programmer	Administrator
Gross Amount	$2,110	$2,520	$3,000
Net Amount	$1,716.93	$1,911.38	$2,150.98

Consultant

Gross amount received: $2110 per week

Less: Withholding Tax: $234.82

Less: Social Security Tax Rate (6% of $ 2,110): $ 126.6

Less: Medicare Tax Rate (1.5% of $2,110): $31.65

Net amount: $1,716.93

Computer Programmer

Normal hours = 40 hours worked *$36 per hour = $1,440

Overtime = 20 hours worked * 1.5times hourly rate * $36 per hour = $1,080

Total Gross amount = $2,520

Less: Withholding Tax: $419.62

Less: Social Security Tax Rate (6% of $ 2,520): $ 151.2

Less: Medicare Tax Rate (1.5% of $2,520): $37.80

Net amount: $1,911.38

Administrator

Normal hours = 40 hours worked *$50 per hour = $2,000

Overtime = 10 hours worked * 2 times hourly rate * $50 per hour = $1,000

Total Gross amount = $3,000

Less: Withholding Tax: $624.02

Less: Social Security Tax Rate (6% of $ 3,000): $ 180

Less: Medicare Tax Rate (1.5% of $3,000): $45

Net amount: $2,150.98

Working:

28% of the difference between the employee’s amount subject to withholding and $1,796

Consultant: ($2,110 - $1,796) * 28% = $87.92

Withholding Amount of Consultant = $356.90+ $23.129.12 = $444.82

Withholding allowance = $70*3 = $210

Net withholding amount = $444.82 - $210= $234.82

Computer Programmer: ($2,520 - $1,796) * 28% = $202.72

Withholding amount of Computer Programmer = $356.90 + $202.72 = $559.62

Withholding allowance = $70*2 = $140

Net withholding amount = $559.62 - $140= $419.62

Administrator: ($3,000 - $1,796) * 28% = $337.12

Withholding amount of Administrator = $356.90+$337.12 = $694.02

Withholding allowance = $70*1 = $70

Net withholding amount = $694.02 - $70= $624.02