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Name, Basic salary, Allowance, Overtime worked, Duration of overtime work, follow, Abel Tena, Br.2,400, 250, 30hrs, Up to 10:00pm.

Sara Chala, 3,200, 500, 20hrs,10:00pm-6:00am.
Nega Girum, 1,600, 100, 10hrs, Weekends and 18hrs Public holiday,
Additional information:
All employees are expected to render services of 160hrs per month and all of them did except Sara Chala who has served only 150hrs.
All employees are permanent employees except Abel Tena.
The allowance of Nega Girum is not taxable.
All employees promised to contribute 10% of their basic salary to the credit association,
Required:
A, Determine the gross earnings,
B, taxable income,
C, total deductions and
D, net pay of all employees.

1 answer

To determine the gross earnings, taxable income, total deductions, and net pay of each employee, we will first need to calculate a few things step by step.

A. Gross Earnings Calculation

  1. Abel Tena:

    • Basic Salary = Br. 2,400
    • Allowance = Br. 250
    • Overtime = 30 hours
    • Assume overtime pay is typically 1.5 times the basic hourly rate. His basic hourly rate is Br. 2,400 / 160 = Br. 15/hour. Thus, overtime pay = 1.5 * Br. 15 * 30 = Br. 675.
    • Gross Earnings = Basic Salary + Allowance + Overtime = 2,400 + 250 + 675 = Br. 3,325

  2. Sara Chala:

    • Basic Salary = Br. 3,200
    • Allowance = Br. 500
    • Overtime = 20 hours. Overtime pay = 1.5 * Br. 3,200 / 160 * 20 = 1.5 * Br. 20 * 20 = Br. 600.
    • Gross Earnings = Basic Salary + Allowance + Overtime = 3,200 + 500 + 600 = Br. 4,300

  3. Nega Girum:

    • Basic Salary = Br. 1,600
    • Allowance = Br. 100 (not taxable)
    • Overtime = 10 hours (weekends) + 18 hours (public holiday) = 28 hours. Overtime pay = 1.5 * Br. 1,600 / 160 * 28 = 1.5 * Br. 10 * 28 = Br. 420.
    • Gross Earnings = Basic Salary + Allowance + Overtime = 1,600 + 100 + 420 = Br. 2,120

Summary of Gross Earnings

  • Abel Tena: Br. 3,325
  • Sara Chala: Br. 4,300
  • Nega Girum: Br. 2,120

B. Taxable Income Calculation

To calculate the taxable income, we subtract any non-taxable allowances and deductions from the gross earnings:

  1. Abel Tena:

    • Taxable Income = Gross Earnings - (Non-taxable Allowances)
    • Taxable Income = 3,325 - 0 = Br. 3,325

  2. Sara Chala:

    • Taxable Income = Gross Earnings - (Non-taxable Allowances)
    • Taxable Income = 4,300 - 0 = Br. 4,300

  3. Nega Girum:

    • Taxable Income = Gross Earnings - Non-taxable Allowances
    • Taxable Income = 2,120 - 100 = Br. 2,020

C. Total Deductions Calculation

Total deductions are comprised of deductions for the credit association contributions:

  • Contribution = 10% of Basic Salary

  1. Abel Tena:

    • Contribution = 10% of Br. 2,400 = Br. 240
    • Total Deductions = Br. 240

  2. Sara Chala:

    • Contribution = 10% of Br. 3,200 = Br. 320
    • Total Deductions = Br. 320

  3. Nega Girum:

    • Contribution = 10% of Br. 1,600 = Br. 160
    • Total Deductions = Br. 160

D. Net Pay Calculation

Net pay is calculated by subtracting total deductions from gross earnings:

  1. Abel Tena:

    • Net Pay = Gross Earnings - Total Deductions = 3,325 - 240 = Br. 3,085

  2. Sara Chala:

    • Net Pay = Gross Earnings - Total Deductions = 4,300 - 320 = Br. 3,980

  3. Nega Girum:

    • Net Pay = Gross Earnings - Total Deductions = 2,120 - 160 = Br. 1,960

Summary of Results

Gross Earnings:

  • Abel Tena: Br. 3,325
  • Sara Chala: Br. 4,300
  • Nega Girum: Br. 2,120

Taxable Income:

  • Abel Tena: Br. 3,325
  • Sara Chala: Br. 4,300
  • Nega Girum: Br. 2,020

Total Deductions:

  • Abel Tena: Br. 240
  • Sara Chala: Br. 320
  • Nega Girum: Br. 160

Net Pay:

  • Abel Tena: Br. 3,085
  • Sara Chala: Br. 3,980
  • Nega Girum: Br. 1,960