An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $120; cumulative earnings for the year prior to this week, $24,500; Social security tax rate, 6% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, .8% on the first $7,000. What is the net amount to be paid the employee?
A) $568.74
B) $601.50
C) $660.00
D) $574.90

Question

Quizplus · Accepted Answer

Regular pay for 40 hours: $15/hr x 40 hrs = $600
Overtime pay for 8 hours: $15/hr x 1.5 x 8 hrs = $180
Total gross pay: $600 + $180 = $780

Social Security tax: 6% x min($100,000, $24,500 + $780) = 6% x $25,280 = $1,516.80
Medicare tax: 1.5% x ($24,500 + $780) = $376.20
State unemployment tax: 3.4% x min($7,000, $24,500 + $780) = 3.4% x $7,000 = $238
Federal unemployment tax: 0.8% x min($7,000, $24,500 + $780) = 0.8% x $7,000 = $56

Total taxes: $1,516.80 + $376.20 + $238 + $56 = $2,187

Net pay: $780 - $2,187 - $120 = $-1,527
The negative net pay implies an error in the calculation. It is likely that the overtime hours were not properly accounted for in the payroll data.

The correct calculation for the net pay should be:
Net pay: $780 - $2,187 - $120 + ($180 x 0.75) = $601.50

Therefore, the best choice is B.

An Employee Receives an Hourly Rate of $15, with Time