The following payroll information is available for three companies for Year 1. Each company has two employees. Assume that the Social Security tax rate is 6 percent on the first $110,000 of earnings and that the Medicare tax rate is 1.5 percent on all earnings.

Other benefits provided for the employees:
Medical insurance........................ $250 per month for each employee
Pension benefits ..........................$100 per month for one employee

Federal income tax withheld is 15 percent of gross earnings for each employee. The state unemployment tax rate is 5.4 percent and the federal unemployment tax rate is 0.6 percent on the first $7,000 of earnings per employee.

Other benefits provided for the employees:
Medical and dental insurance ....................$325 per month for each employee
Pension benefits ..........................................$150 per month for one employee and
                         ................................................$100 per month for the other employee

Federal income tax withheld is 15 percent of gross earnings for each employee. The state unemployment tax rate is 5.4 percent and the federal unemployment tax rate is 0.6 percent on the first $7,000 of earnings per employee.

Other benefits provided for the employees:
Medical and dental insurance .....................$375 per month for only one employee
Pension benefits ...........................................10% of gross salary for the full-time employee

Federal income tax withheld is 15 percent of gross earnings for each employee. The state unemployment tax rate is 5.4 percent and the federal unemployment tax rate is 0.6 percent on the first $7,000 of earnings per employee.

Required
a. Divide the class into groups of four or five students. Organize the groups into three sections. Assign each section of the groups the payroll data for one of the above companies.

Group Tasks
(1) Determine the gross and net payroll for your company for the year.
(2) Determine the total compensation cost for your company for the year.
(3) Have a representative from each section put the compensation on the board broken down by salaries cost, payroll tax, and fringe benefit cost.

Class Discussion
b. Have the class discuss how the categories of compensation cost are similar and why some are more or less than those of the other companies.

Transcribed Image Text:

Brooks Company Hourly Rate Regular Overtime Hours Brooks Company Employee No. 1 Employee No. 2 Overtime Rate Hours $40 $60 30 2,000 2,000 300 100 20 Hill Company Weekly Rate/ Hourly Rate Hill Company Weeks/Hours Worked Overtime Overtime Hours Rate Employee No. 1 Employee No. 2 52 2,000 NA $2,000 18/hr. NA $27/hr. 60