An employee receives an hourly rate of $27, with time and a half for all hours worked in excess of 40 during a week.Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $106,800; and Medicare tax rate, 1.5% on all earnings.What is the gross pay for the employee?

Question

Quizplus · Accepted Answer

The employee worked 46 hours, so they worked 6 hours in excess of 40 hours. Therefore, they earned 40 hours at their regular rate of $27 and 6 hours at time and a half ($27 x 1.5 = $40.50).

Regular pay: $27 x 40 hours = $1,080 
Overtime pay: $40.50 x 6 hours = $243

Total gross pay = $1,080 + $243 = $1,323.

Next, we need to calculate the taxes withheld.

Social security tax: This employee's earnings for the week do not exceed the maximum taxable amount, so the social security tax rate of 6.0% will apply to all earnings.

Total social security tax = $1,323 x 0.06 = $79.38

Medicare tax: This employee's earnings are subject to the Medicare tax rate of 1.5% on all earnings.

Total Medicare tax = $1,323 x 0.015 = $19.84

Finally, we can calculate the net pay.

Net pay = Gross pay - (Federal income tax + Social security tax + Medicare tax) 
Net pay = $1,323 - ($350 + $79.38 + $19.84) 
Net pay = $873.78

Therefore, the correct answer is D) $1,323.00.

An Employee Receives an Hourly Rate of $27, with Time