Massimini Company Had the Following Payroll Data for the Year

question 173

Essay

Massimini Company had the following payroll data for the year: $\begin{array}{lr}\text { Gross earnings of employees } & \$ 740,000 \\\text { Employee earnings not subject to Social Security tax } & 140,000 \\\text { Employee earnings not subject to FUTA or SUTA tax } & 490,000\end{array}$

Assuming the following:
$\begin{array}{lrl}\text { FICA tax rate on first } \$ 117,000 & 7.65 \% \text { (1.45\% over } \\\$ 117,000) & \\\text { State Unemployment tax rate } & 5.4 \% \quad \text { (SUTA) } \\\text { Federal Unemplovment tax rate } & 8 \% \text { (FUTA) }\end{array}$ Instructions
Compute Massimini's payroll tax expense for the year. Make a summary journal entry to record the payroll tax expense.

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Definitions:

Sell

The act of giving or handing over something in exchange for money.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behaviors are valid.

Sunk Cost

A past cost that has already been incurred and cannot be recovered, which should not influence future financial or business decisions.