Business Mathematics Chapter 9 - Payroll
Biweekly
When Employers pay wages every 2 weeks When employees are paid every two weeks, they are paid 26 times a year.
Percentage Method
A method to calculate with-holdings. Opposite of wage bracket method
Ace Manufacturing has unemployment taxable earnings this peirod of $20,000. The SUTA and FUTA rates are 5.4% and .8% respectively. The SUTA tax is:
$1,080 Taxable earnings of $20,000 times the SUTA rate of 5.4% = $1,080 SUTA tax
Lai Xiaodong, a 22-year-old college-educated man, accepted a job at Foxconn Technology (where the iPad was being produced for Apple) in Chengdu, China, for $20 a day at 12 hours a day, 6 days a week. What were Lai's hourly, weekly, and annual gross pay?
$20 / 12 = $1.67 per hour $20 x 6 = $120 per week $120 x 52 (weeks in a year) = $6,240 per year
Earnings for the year were $5,000. The FUTA rate is 6.2% and the company received a 5% SUTA credit. Match the amounts to the respective terms.
$5,000 - Taxable Earnings (earnings below $7,000 per person per calendar year are taxable for FUTA) 6.2 % - Adjusted FUTA rate 1.2% - Unadjusted FUTA rate $60 - FUTA tax amount ($5,000 x .012 = $60)
Logan Company pays Jackie Okamoto a straight commission of 15% on her net sales (net sales are total sales less sales returns). In May, Jackie had net sales of $56,000. Logan gave Jackie a $600 draw in May. What is Jackie's gross pay? Logan calculated Jackie's commission minus her draw as follows:
$56,000 x .15 = $8,400 - 600 = $7,800
Franklin has net sales of $322,500. He earns commission on a variable scale. Net Sales Commission Rate $1 - 200,000 2% 200,000 - 300,000 3% Oveterm-32r 300,000 4% Match the values to the respective terms.
$900 - Earnings at the 4% level (22,500 x .04) $3,000 -Earnings at the 3% Level (100,000x.03) $4,000 - Earnings at the 2% level (200,000 x .02) $7,900 -Sales Commission (900 + 3000 + 4000)
Variable Commission Scale: Last month, Jane Ring's net sales were $160,000. What is Jane's gross pay based on the following schedule? Up to $35,000 4% Excess of $35,000 to $45,000 6% Over $45,000 8%
(35,000 x .04) + (10,000 x .06) + (115,000 x .08) $1,400 + $600 + $9,200 = $11,200
Logan company pays Abby Rogers on the basis of the following schedule: 1 - 50 Units = .50 51 - 150 units = .62 151 - 200 units = .75 Over 200 units = 1.25 Last week Abby produced 300 dolls. What is Abby's gross pay
(50 x .50) + (100 x .62) +(50 x .75) + (100 x 1.25) 25 + 62 + 37.50 + 125 = $249.50
Abby Lewis produced 165 units this pay period and earns piece rate on the following differential scale: 1 - 100 = $3.25 101 - 150 = $3.50 Over 150 = $3.75 Her pay for this period is?
100 x 3.25 = 325 50 x 3.50 = 175 15 x 3.75 = 56.25 $325 + $175 + $56.25 = $556.25 Solution: $556.25
Jan Earns 4% on net sales. This period she had sales of $200,000 and returns of $20,000. She also took an advance of $1,000. Match the amounts to the respective terms.
4% = Commission Rate $1,000 = Draw $6,200 = Commission Received (Commission sales less the draw $7,200 - $1000 = $6,200) $7,200 = Commission Sales (net sales x comission rate. $180,000 x .04 = $7,200) $180,000 =Net sales (sales less returns. 200,000 - $20,000 = $180,000
Westway Company pays Suzie Chan $2,500 per week. Assume Social Security is 6.2% on $118,500 and 1.45% for Medicare. a. By the end of week 52, how much did Westway deduct for Suzie's Social Security and Medicare for the year? b. What state and federal unemployment taxes does Westway pay on Suzie's yearly salary? The state unemployment rate is 5.1% and the federal unemployment tax is 0.6% on the first $7,000.
A. Social Security: calculate gross pay: $2,500 x 50 = $125,000 She only has to pay 6.2% Social Security tax on the first $118,500 she earned, so we calculate this as: $118,500 x .062 = $7,347 Total social security tax deducted so far this year = $7,347 Medicare: 2,500 x 52 (weeks in a year) = 130,000 $130,000 x .0145 = $1,885 Total medicare tax deducted so far this year = $1885 B.State unemployment rate is 5.1%, so we calculate her deduction as: $7000 x .051 = $357 Federal unemployment rate is .8%, so we calculate this as: $7000 x .006 = $ 42
Pat Maninen earns a gross salary of $4,800 each week. Assume a rate of 6.2% on $118,500 for Social Security and 1.45% for Medicare. a. What are Pat's first week's deductions for Social Security and Medicare? b. Will any of Pat's wages be exempt from Social Security and Medicare for the calendar year?
A. Social Security: $4,800 x 6.2% = $4,800 x .062= $297.60 Social Security Deductions: $297.60 Medicare: $4800 x 1.45% = $4800 x .0145 = 69.60 Medicare Deductions: 69.60 B. Social Security cap is at $118,500 Determine Yearly SS Gross Pay: $4800 x 52 weeks in a year = $249,600 Subtract Yearly gross pay from SS cap $249,600 - $118,500 = $131,100 SS Exemption: $131,100 Medicare has no cap and therefore no exemptions Medicare Exemptions: $0
Deductions
Amounts subtracted from your gross pay. Once deductions are subtracted from your gross pay, you get net pay
Variable Commission Scale
Company pays different commission rates for different levels of net sales
W-4 (employee's withholding Allowance certificate)
Completed by employee to indicate allowance claimed to determine the amount of FIT that is deducted - Employee Name - Allowance & Marital Status - Cumulative Earnings - Salary per week Earnings: -Regular -Overtime -Gross - Cumulative Earning FICA taxable earnings -Social Security -Medicare) Deductions: -FIT -SIT -Health Insurance -Net Pay
Gross Pay With Overtime
Earnings for 40 hours + Earnings at time and a half rate (1.5)
Assume a company had total wages of $19,000 in a calendar year. No employee earned more than $7,000 during the calendar year. The FUTA tax is .6% (6% minus the company's 5.4% credit for state unemployment tax). How much does the company pay in FUTA tax?
FUTA Tax - Suta Tax = Tax for FUTA 6% - 5.4% = .6% .006 x $19,000 = $114 FUTA tax due to federal government.
Federal Income Tax withholding (FIT)
Federal Tax withheld from paycheck. THe more allowanes an employee claims, the less money the employer deducts from the employee's paycheck. Each pay period has its own FIT pay period table.
salary plus commission: Logan Company pays Joe Roy a $3,000 monthly salary plus a 4% commission for sales over $20,000. Last month Joe's net sales were $50,000. Logan calculated Joe's gross monthly pay as follows:
Gross Pay= Salary + ( Comission x Sales over $20,000) $3,000 + (.04 x $30,000) $3000 + $1,200 $4,200
When 40 hours or less were worked in a week, gross pay is found by multiplying regular _____ worked by ____ per hour.
Hours , Rate
Piece Rate
It is thought that paying workers by the piece encourages them to produce more. Gross Pay = Number of Units x Rate Per Unit
Overrides
Managers receive commission based on the net sales of the people they supervise
Differential Pay Schedule
Pay rate is based on a schedule of units completed
Federal Insurance Contribution Act (FICA)
Percent of base amount of each employee's salary. FICA taxes are used to fund retirement, disabled workers, medicare, and so on. FICA is now broken down into social security and medicare.
Federal Unemployment Tax Act (FUTA)
Tax paid by employer, Current rate is .8% on first $1,000 of earnings.
State Unemployment Tax Act (SUTA)
Tax paid by employer. Rate varies depending on amount of unemployment the company experiences. Differs from state to state.
Payroll registers include the following columns of information:
Regular Earnings Overtime Earnings Cumulative Earnings Employee Name Gross Pay
Assume a company has total wages of $20,000 and $4,000 of the wages are exempt from SUTA. What are the company's SUTA and FUTA taxes if the company's SUTA rate is 5.8% due to a poor employment record? The exempt wages (over $7,000 earnings per worker) are not taxed for SUTA or FUTA. So the company owes the following SUTA and FUTA taxes:
SUTA: $20,000 - $4,000 = $16,000 FUTA: $16,000 x .006 = $96
Draw
The receiving of advance wages to cover business or personal expenses. Once wages are earned, drawing amount reduces actual amount recieved
Overtime
Time and a half pay for more than 40 hours of work Hourly Overtime Pay Rate = Regular Hourly Pay Rate x 1.5
Gross Pay
Wages before deductions; Hours Employee Worked x Rate Per Hour
straight commission
Wages calculated as a percent of the value of goods sold
Weekly
When Employers pay Employee wages once a week When employees are paid once a week, they are paid 52 times in a year.
Monthly
When employers pay wages once a month. When employees are paid once a month they are paid 12 times a year
Semimonthly
When employers pay wages twice a month When employees are paid twice a month, they are paid 24 times a year
estimate an hourly full-time rate
dividing an annual salary by 1,000 and then dividing by 2. Example: $30,000/1,000 = $30; 30/2 = $15.
estimate an annual salary
doubling the full-time hourly rate and then multiplying by 1,000. Example: $15 an hour, $15 × 2 × 1,000 = $30,000.
