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 to the employee?
A) $568.74
B) $601.50
C) $660.00
D) $574.90

Question

Quizplus · Accepted Answer

First, calculate the regular pay and overtime pay for the week:

Regular pay = 40 hours x $15/hour = $600 
Overtime pay = 8 hours x $15/hour x 1.5 = $180

Total gross pay = $600 + $180 = $780

Next, calculate the taxes and deductions:

Federal income tax withheld = $120 
Social security tax = 6% x $100,000 x ($24,500/52 weeks) = $71.15 
Medicare tax = 1.5% x $780 = $11.70 
State unemployment compensation tax = 3.4% x $7,000 = $238 
Federal unemployment compensation tax = 0.8% x $7,000 = $56

Total taxes and deductions = $120 + $71.15 + $11.70 + $238 + $56 = $497.85

Net pay = Gross pay - Taxes and deductions 
Net pay = $780 - $497.85 = $282.15

Therefore, the net amount to be paid to the employee is $601.50.

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