Question

An employee receives an hourly rate of $25, 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, 45; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to the employee?

a.$748.44
b.$762.00
c.$775.00
d.$837.50

Answer 1

To calculate the net amount to be paid to the employee, we need to determine the regular pay and the overtime pay. The employee's regular pay is calculated by multiplying the regular rate by the regular hours. The overtime pay is calculated by multiplying the overtime rate by the overtime hours. The net amount is the gross pay minus the deductions and the federal income tax withheld.

Step-by-step explanation:

To calculate the net amount to be paid to the employee, we need to determine the employee's regular pay and overtime pay.

The employee worked 45 hours, which means they worked 5 hours of overtime (45 - 40). The regular pay is calculated by multiplying the regular rate ($25) by the regular hours (40): $25 * 40 = $1000.

The overtime pay is calculated by multiplying the overtime rate (time and a half of the regular rate) by the overtime hours (5): $25 * 1.5 * 5 = $187.50.

The total gross pay is the sum of the regular pay and the overtime pay: $1000 + $187.50 = $1187.50.

Now, we can calculate the deductions. Social Security tax is 6.2% of the gross pay: 0.062 * $1187.50 = $73.57. Medicare tax is 1.45% of the gross pay: 0.0145 * $1187.50 = $17.21.

Finally, we subtract the federal income tax withheld ($350) from the gross pay ($1187.50) and subtract the deductions ($73.57 + $17.21): $1187.50 - $73.57 - $17.21 - $350 = $746.72.

The net amount to be paid to the employee is $746.72.