Question

Mandy Feng employs Jay Johnson at a salary of $35,000 a year. Feng is subject to employer Social Security taxes at a rate of 6.2% and Medicare taxes at a rate of 1.45% on Johnson’s salary. In addition, Feng must pay SUTA tax at a rate of 5.4% and FUTA tax at a rate of 0.6% on the first $7,000 of Johnson’s salary.
Compute the total cost to Feng of employing Johnson for the year.

Answer 1

Answer: $38,097.50

Explanation:

Mandy Feng has to pay Johnson $35,000 for the year as well as various taxes. Adding all of these up is the total cost of hiring Johnson to Mandy Feng.

Calculating therefore we have,

= Salary + Social Security Taxes + Medicare Taxes + SUTA Tax + FUTA Tax

Remember, it is stated that FUTA and SUTA are applicable to only the first $7,000 of Johnson's pay.

= 35,000 + (6.2% * 35,000) + (1.45% * 35,000) + ( 5.4% * 7,000) + ( 0.6% * 7,000)

= 35,000 + 2,170 + 507.50 + 378 + $42

= $38,097.50

The total cost to Feng of employing Johnson for the year is $38,097.50