Question

Note: In this chapter and in all succeeding work throughout the course, unless instructed otherwise, calculate hourly rates and overtime rates as follows:

1.	Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimal places (round the hourly rate to 2 decimal places before multiplying by one and one-half to determine the overtime rate).
2.	If the third decimal place is 5 or more, round to the next higher cent.
3.	If the third decimal place is less than 5, simply drop the third decimal place.
	Examples:	Monthly rate $1,827 Weekly rate ($1,827 × 12)/52 = $421.615 rounded to $421.62 Hourly rate $421.62/40 = $10.540 rounded to $10.54 O.T. rate $10.54 × 1.5 = $15.81

Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow.

Example 4-1

Carl Jamison, an employee for the Scharman School, belongs to a tax-deferred retirement plan to which he contributes 3 percent of his pay which is matched by the school. His biweekly pay is $2,500. Because of the deferral (3% × $2,500 = $75), $2,425 is subject to federal income tax withholding.

George Clausen (age 48) is employed by Kline Company and is paid a salary of $42,588. He has just decided to join the company's Simple Retirement Account (IRA form) and has a few questions. Answer the following for Clausen:

a. What is the maximum that he can contribute into this retirement fund?

$_________

b. What would be the company's contribution?

$___________

c. What would be his weekly take-home pay if he contributes the maximum allowed retirement contribution (married, 2 allowances, wage-bracket method, and a 2.3% state income tax on total wages)?

Click here to access the Wage-Bracket Method Tables.

$________

d. What would be his weekly take-home pay without the retirement contribution deduction?

$_________

Answer 1

a)George Clausen (age 48) maximum that he can contribute into this retirement fund is $21,719.88;

Annual Salary: $42,588

Rate of Contribution Each Year @3% = $42,588*0.03*17 = $21,719.88

He is now 48 years old, considering he will retire at age of 65 years - so he will be working for 17 years more

b)Company Contribution is same as Employee Contribution as mentioned in above example. So its $21,719.88.

c) Wage Bracket Method Tables are not given, cant proceed with incomplete information

d) The weekly take home pay is $819 = Yealy Pay/no.of weeks = 42,588/52 = $819