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	$4,000 per week		$60 per hour		$50 per hour
Overtime earnings rate*	Not applicable		1.5 times hourly rate		2 times hourly rate
Number of withholding allowances	2		1		2
*For hourly employees, overtime is paid for hours worked in excess of 40 hours per week.

For the current pay period, the computer programmer worked 50 hours and the administrator worked 48 hours. The federal income tax withheld for all three employees, who are single, can be determined from the wage bracket withholding table in Exhibit 2. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and one withholding allowance is $75.

Determine the gross pay and the net pay for each of the three employees for the current pay period. If required, round your answers to two decimal places.

	Consultant	Computer Programmer	Administrator
Gross pay	$4,000	$3,300	$2,800
Net pay	$fill in the blank 4	$fill in the blank 5	$fill in the blank 6

Answer 1

The gross pay for each of the three - employees for the current pay period as follows:

	Consultant	computer programmer	administratir
Regular earning rate	$4000 per week	$60 per hour	$50 per hour
Overtime earning rate	NA	$90 Per hour(60×1.5)	$100 per hour(50×2)
Number of withholding allowances	2	1	2
Hours worked		50hours	48hours
One withholding allowance	75
Gross pay	$4000	$3300 ($60×40=$2400) +(60×10×1.5=$900)	$2800 ($50×40=$2000) +(50×8×2=$800)

The net pay for each of the three employees for the current pay period as follows:

	Consultant	computer programmer	administrator
Gross pay	$4000	$3300	$2800
Number of withholding allowances	2	1	2
Value of one allowance	75	75	75
Amount to be deducted	150(75×2)	75(75×1)	150(75×2)
Amount subject to withholding	$3850(4000-150)	$3225(3300-75)	$2650(2800-150)
Less: federal income tax with holding (working note)	$939.52	$757.02	$596.02
FICA@6%(on gross pay)	$240(4000×6%)	$198(3300×6%)	$168(2800×6%)
Medicare @1.5% (on gross pay)	$60(4000×1.5%)	$49.5(3300×1.5%)	$42(2800×1.5%)
Net pay	$2760.48(4000-939.52-240-60)	$2295.48(3300-757.02-198-49.5)	$1993.98(2800-596.02-168-42)

Working note:

Federal income tax withholding	consultant	computer programmer	administrator
Initial withholding	$890.02	$356.90	$356.90
Bracket % over bracket excess	$49.50(3850-3700=150×33%)	$400.12(3225-1796=1429×28%)	$239.12(2650-1796=854×28%)
Total federal income tax withholding	$939.52(890.02+49.50)	$757.02(356.90+400.12)	$596.02(356.90+239.12)