Calculate overhead costs for a Chris, who earns $12/hour milking cows for Snohomish Dairies. Here are the
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Calculate overhead costs for a Chris, who earns $12/hour milking cows for Snohomish Dairies. Here are the details:
- She works 10 hours per day, 6 days per week, 52 weeks per year (2 weeks are provided for sick leaves, vacation and personal leave)
- She is married, age 45 and has two children
- The health insurance premium is $800/month and is paid by Snohomish
- Life insurance is $0.20 per month per $1000 of coverage. Snohomish provides $50,000 of coverage and Chris elects to pay for another $50,000 out of her salary.
- Short-term and long-term disability insurance is 2% of salary, paid by Snohomish
- Workers\' compensation insurance is $1.2859 per hour worked (include the two weeks of leave time as hours worked). The experience rating factor is 0.95
- Social security is 6.2% paid by Snohomish and 6.2% paid by Chris. These apply to the first $128,700 of income
- Medicare/Medicaid is 1.45% paid by Chris and 1.45% paid by Snohomish
- Retirement is 5% deducted from Chris’ salary with a 5% match from Snohomish
- Federal unemployment tax is 0.6% of the first $7,000 of salary
- To simplify the calculations, assume federal income tax is 10% of Chris’ base income
- Assume State income tax is 3% of Chris’ base income
- State unemployment tax is 2% of the first $47,300 of salary
- Chris elects to put $150/month from his salary into a Health Savings Account
- Calculate the total cost of payroll expenses (aside from salary) paid by Snohomish Dairies and Chris.
- Calculate the percentage that these expenses are of the total salary.
- Calculate Chris’ total cost to Snohomish Dairies (salary + benefits) and Chris’ net income after taxes and benefit withholdings
- If you were the manager of this dairy, what would you focus on to lower Chris’ overall cost to the operation?
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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