Midwest Shipping Pays Employees at the End of Each Month

question 7

Essay

Midwest Shipping pays employees at the end of each month. Payroll information is listed below for January, the first month of the fiscal year. Assume that none of the employees exceeds the Federal unemployment tax maximum salary of $7,000 in January. $$\begin{array} { l r } \text { Salaries } & \$ 800,000 \\\text { Federal and state income taxes withheld } & 160,000 \\\text { Federal unemployment tax rate } & 0.80 \% \\\text { State unemployment tax rate (after FUTA deduction) } & 3.00 \% \\\text { Social Security (FICA) tax rate } & 7.65 \%\end{array}$$ Record salaries expense and payroll tax expense for the January pay period.

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Definitions:

Month

A unit of time, roughly based on the period of the Moon's orbit around Earth, traditionally used to measure durations of approximately 30 days.

Break Even

The point at which total costs and total revenue are equal, resulting in no net loss or gain.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Costs

Costs that do not change with the amount of goods or services produced, such as rent, salaries, and insurance.