An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and the federal income tax to be withheld was $614.
(a) Determine the gross pay for the week.
(b) Determine the net pay for the week.
Easy question
so, what's your answer to this easy question?
To determine the gross pay for the week, we need to calculate the earnings for the regular hours (up to 40 hours) and the earnings for the overtime hours (hours in excess of 40).
(a) Calculate the gross pay for the regular hours:
For the first 40 hours, the employee earns $40 per hour.
Regular earnings = 40 hours * $40/hour = $1600
(b) Calculate the gross pay for the overtime hours:
For the remaining 20 hours (60 total hours - 40 regular hours), the employee earns 1.5 times the regular rate.
Overtime earnings = 20 hours * ($40/hour * 1.5) = $1200
(c) Calculate the total gross pay for the week:
Total gross pay = Regular earnings + Overtime earnings = $1600 + $1200 = $2800
Now let's determine the net pay for the week.
(d) Calculate the total tax deductions:
Social Security tax deduction = Gross pay * Social Security tax rate = $2800 * 6.0% = $168
Medicare tax deduction = Gross pay * Medicare tax rate = $2800 * 1.5% = $42
Federal income tax deduction = $614 (given in the problem)
Total tax deductions = Social Security tax deduction + Medicare tax deduction + Federal income tax deduction = $168 + $42 + $614 = $824
(e) Calculate the net pay:
Net pay = Gross pay - Total tax deductions = $2800 - $824 = $1976
Therefore, the gross pay for the week is $2800, and the net pay for the week is $1976.