Morrison Distribution Center offers warehousing services. The company is considering adding a third shift with 12 new employees. Estimate the third shift payroll costs assuming: 

(1) The average warehouse employee earns $21,000 per year. 

(2) The state unemployment tax rate is 5.4% and the federal rate is 0.8% (both apply to the first $7,000 of earnings). 

(3) The employer’s cost of health insurance averages 22% of an employee’s earnings.

INSTRUCTIONS

1. Calculate the salary expense related to adding the 12 new employees.

2. Compute the additional payroll taxes Morrison will pay. 

3. Determine the total cost to add the third shift.