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	$2,310 per week		$34 per hour		$44 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	$2310	$2380	$2640
Net pay	$1694.73	$1720.28	$1838.68

Calculation:

1. Consultant:

As per given information,

Regular earnings rate = $2310 per week

Overtime earnings rate = Not applicable

Number of withholding allowances = 3

Social security tax rate = 6%

Medicare tax rate = 1.5%

Federal income tax withheld = Can be determined by adding $356.90 to 28% of the difference between the employee's amount subject to withholding and $1796.

So,

Gross pay or earnings = Regular earnings + Overtime earnings

= $2310 + N.A.

= $2310 per week

Social security tax = Gross earnings * 6%

= $2310 * 6%

= $138.60

Medicare tax = Gross earnings * 1.5%

= $2310 * 1.5%

= $34.65

Amount subject to withholding = Gross earnings - Withholding allowances amount

= $2310 - ($70 * 3 allowances)

= $2100

Here,

Federal income tax withheld = $356.90 + 28% * [Amount subject to withholding - $1796]

= $356.90 + 28% * [$2100 - $1796]

= $356.90 + $85.12

= $442.02

Net pay = Gross pay - [Social security tax + Medicare tax + Federal income tax withheld]

= $2310 - [$138.60 + $34.65 + $442.02]

= $1694.73

2. Computer programmer:

As per given information,

Regular earnings rate = $34 per hour

Overtime earnings rate = 1.5 times hourly rate

Number of hours worked = 60 hours

(Normal working hours in a week are 40 hours)

Number of withholding allowances = 2

Social security tax rate = 6%

Medicare tax rate = 1.5%

Federal income tax withheld = Can be determined by adding $356.90 to 28% of the difference between the employee's amount subject to withholding and $1796.

So,

Regular earnings = $34 per hour * 40 hours = $1360 per week

Overtime earnings = ($34 * 1.5 times) * (60 - 40 hours) = $1020 per week

Gross pay or earnings = Regular earnings + Overtime earnings

= $1360 + $1020

= $2380 per week

Social security tax = Gross earnings * 6%

= $2380 * 6%

= $142.80

Medicare tax = Gross earnings * 1.5%

= $2380 * 1.5%

= $35.70

Amount subject to withholding = Gross earnings - Withholding allowances amount

= $2380 - ($70 * 2 allowances)

= $2240

Here,

Federal income tax withheld = $356.90 + 28% * [Amount subject to withholding - $1796]

= $356.90 + 28% * [$2240 - $1796]

= $356.90 + $124.32

= $481.22

Net pay = Gross pay - [Social security tax + Medicare tax + Federal income tax withheld]

= $2380 - [$142.80 + $35.70 + $481.22]

= $1720.28

3. Administrator:

As per given information,

Regular earnings rate = $44 per hour

Overtime earnings rate = 2 times hourly rate

Number of hours worked = 50 hours

(Normal working hours in a week are 40 hours)

Number of withholding allowances = 1

Social security tax rate = 6%

Medicare tax rate = 1.5%

Federal income tax withheld = Can be determined by adding $356.90 to 28% of the difference between the employee's amount subject to withholding and $1796.

So,

Regular earnings = $44 per hour * 40 hours = $1760 per week

Overtime earnings = ($44 * 2 times) * (50 - 40 hours) = $880 per week

Gross pay or earnings = Regular earnings + Overtime earnings

= $1760 + $880

= $2640 per week

Social security tax = Gross earnings * 6%

= $2640 * 6%

= $158.40

Medicare tax = Gross earnings * 1.5%

= $2640 * 1.5%

= $39.60

Amount subject to withholding = Gross earnings - Withholding allowances amount

= $2640 - ($70 * 1 allowances)

= $2570

Here,

Federal income tax withheld = $356.90 + 28% * [Amount subject to withholding - $1796]

= $356.90 + 28% * [$2570 - $1796]

= $356.90 + $216.72

= $573.62

Net pay = Gross pay - [Social security tax + Medicare tax + Federal income tax withheld]

= $2640 - [$158.40 + $39.60 + $573.62]

= $1868.38