Chapter 8: Determining Labor Burden
Learning Objectives
At the completion of this chapter the student should be able to:
• Identify and calculate the cost of the different labor burden components.
Instructional Hints
• In Chapter 3, we looked at how labor costs were processed in the accounting system. After
Activities
• Have the students find the current Social Security and Medicare rates.
• Assign the students different states and have them find the SUTA limit and the range of
Instruction Resources
• The figures from this chapter in electronic format and PowerPoint slides can be found at
the instructor’s website.
• Current copies of IRS forms and publications can be found at www.irs.gov.
Solutions to the Textbook Problems
1. Allowances are paid to the employee to cover out of pocket expenses and are subject to
2. These costs are paid by the employees and are deducted from the employee’s wages. They
3. FUTA is paid on the first $7,000 of each employee’s wages. Every time an employee is
4. Reduce the cost, frequency, and severity of their accident claims by improved jobsite safety.
5. Overtime Wage Rate = ($22.00/hr)(1.5) = $33.00/hr
Overtime Hours = 2,104 hr + 80 hr – (52 wk/yr)(40 hr/wk) = 104 hr
Wages = (52 wk/yr)(40 hr/wk)($22.00/hr) + (104 hr)($33.00/hr) +
$500/yr = $49,692/yr
6. Wages = $145,000/yr + $10,000/yr = $155,000/yr
Allowances = ($500/mo)(12 mo/yr) = $6,000/yr
Wages and Allowances = $155,000/yr + $6,000/yr = $161,000/yr
7. See Instructor’s website\Homework Excel Problems\Problem 08-07.xlsx.