Question

PS:  Social Security tax withholding at 6.2 percent IS NOT 79.51 and Medicare tax withholding at 1.45 percent IS NOT 18.5

Lisa Meilo works for Pacific Company, which pays its employees time-and-a-half for all hours worked in excess of 40 per week. Meilo's pay rate is $27.00 per hour. Her wages are subject to federal income tax, a Social Security tax deduction at the rate of 6.2 percent, and a Medicare tax deduction at the rate of 1.45 percent. She is married and claims three allowances. Meilo has an unpaid half-hour lunch break during an 8½-hour day. In the most recent pay period, she worked 45 hours. Meilo's beginning cumulative earnings are $50,760.

Complete the following. If required, round all intermediate calculations and answers to the nearest cent, use rounded answers in subsequent computations.

a.  hours at straight time × $ per hour		$
b.  hours overtime × $ per hour
c. Total gross pay		$
d. Federal income tax withholding	$162.00
e. Social Security tax withholding at 6.2 percent
f. Medicare tax withholding at 1.45 percent
g. Total withholding
h. Net pay		$

Answer 1

	Amount $
a.  hours at straight time × $ per hour	1,080.00	(40 x 27 )
b.  hours overtime × $ per hour	202.50	( 5 x 27 x 1.5 )
c. Total gross pay	1,282.50	( 1,080 + 202.50)
d. Federal income tax withholding	162.00	Given
e. Social Security tax withholding at 6.2 percent	79.52	( 1,282.50 x 6.2% )
f. Medicare tax withholding at 1.45 percent	18.60	( 1,282.50 x 1.45% )
g. Total withholding	260.12	( 162 + 79.52 + 18.60 )
h. Net pay	1,022.38	( 1,282.50 - 260.12 )