Chapter 6

PAYROLL DISTRIBUTION

Chapter 6: PAYROLL DISTRIBUTION

Compensation income of the employees. Compensation in remuneration for services performed by an employee. Salaries, wages, bonuses, allowances, etc. Payroll is a sheet of information containing the total wages of employees for a specific period.

Types of compensation: 1. Salary 2. Time wage 3. Piece rate compensation 4. commission

Salary
1. Weekly salary = annual salary / 52 2. Bi-weekly salary = annual salary / 26 3. Monthly salary = annual salary / 12

4. Semi-monthly salary = annual salary / 24

Time Wages- excess of regular hrs (overtime hrs) 1. 1.3 x reg. hourly rate 2. 2.0 x reg. hourly rate

To compute time wages :

Gross Pay = Reg. pay + overtime pay Reg. Pay = No. of Hrs. worked x hourly rate overtime Pay = No. of overtime hrs worked x overtime rate

Piece-Rate Compensation

The workers are paid for the no. of items produced or completed.
Types of Piece-Rate Compensation Plan 1. Straight piece-rate compensation plan Ex: a cutter in a factory is paid P25 for every baby dress she cuts. In a day, she is able to cut 60 dresses. How much is her gross pay on that day?

Soln Gross Pay = Amt. per pc. Produced x No. of pcs. Produced = P25.00 x 60 = P1,500.00 2. Piece-rate bonus compensation plan Ex: An embroiderer is paid P13.00 for each cap embroidered for the 1st 80 pcs. & P15.00 for each in excess of 80 pcs embroidered for 1 week. If she embroidered 100 pcs. in a week, how much is her gross pay? Soln P13.00 x 80 pcs. = P1,040.00 P15.00 x ______ = P 300.00 20 pcs. _________ 100 pcs. P 1,340.00

3. Graduated Piece-Rate Compensation Plan Usually the amount paid per item increases as the workers output increases. Ex: The wrapping employees of a candy factory are paid per week on the ff. graduated pc-rate compensation plan:

P20 per hundred pcs. For the 1st 300 pcs. wrapped
P25 per hundred pcs. For the 1st 400 pcs. wrapped P30 per hundred pcs. For the 1st 700 pcs. wrapped Soln 1st 300 pcs wrapped 300/100 2nd 400 pcs wrapped 400/100 = 3 x P20 = 4 x P25 = P 60 = P100 P886

In excess of 700 pcs ________ 2,420/100

3,120 pcs.

= 24.2 x P30 = P726 ____

Commissions
1. Straight commission Commission = Amt. of sales or purchase made x commission rate Commission Rate = Commission / amt. of sales or purchase made Amt. of sales = Commission / Commission rate 2. Commission & Bonus

3. Commission Plus Override- earn commissions on all sales they make + a % on the other sales of their representatives.
4. Salary & Commission- person received basic salary + a % on the sales or collections made

Net Pay
Gross Pay/ Gross Income- Total earnings; amt. received by the employee w/o deductions. Net Pay/ Net Income - Deductions are made from the gross pay

- subtract the sum of all the deductions from the gross pay

Ex: Mr. P gross pay for the month of June is P22,500. His deductions are SSS Premium, P83.30; withholding tax, P87.52; & Medicare P12.50. Find his net pay. Soln Gross Pay Deduction SSS Premium P83.30 P 22,500.00

Withholding Tax P87.52 Medicare Net Pay P 12.50 P 183.32 __________ P 22, 316.68

Chapter 8

BORROWING & LENDING MONEY

Chapter 8: BORROWING & LENDING MONEY

Suppose the principal P is invested at the rate r for t years. Thus the simple interest I is computed based on the original principal during the whole time multiplied by the product of rate r & time t, that is It follows that I= Prt t=I __ Pr r=I __ Pt Let F be the final amount resulting from the investment of P for t years at the rate r, & I be the interest rate at the end of t years. F=P+I = P + Prt = P (1+ rt) * Note that the time unit will be in terms of year, unless specified.

Principal in Terms of Final Amount

Deduce from F = P (1+rt) the formula for P, i.e. P = ____ F 1+ rt

Example: Mrs. Yen invested P20,000 w/c accumulates to P22,500 in 10 months. Find the simple interest rate. Solution: P = P20,000, F= P22,500, t= 10 months or 5/6 year. From the formula I=Prt, e have I = F-P 2,500 r = __ ___ = __________ Pt Pt 20,000 (5/6) = 0.15 or 15 %

Time t

No. of months If the time is expressed in months, then use t = ___________ 12 F ___ For the time to be in terms. To solve for t, we have 1+ rt = P F Or rt = ___ - 1 P

The t is given by the formula t= Time Conversion

If the time is in terms of: a) months, then divide by 12

__ __ - 1 1 F ( ) r P

b) Semiannual pds, the divide by 2

c) Quarterly pds, then divide by 4 d) Bimonthly pds, then divide by 6 e) Semimonthly pds, then divide by 24

If the time is expressed in days, the there are 2 kinds of time to convert the no. of days in D in yrs. D No. of days a) t =__________ = __________ , for exact interest 365 365

D No. of days b) t =__________= __________ , for ordinary interest 360 360

* Ordinary interest is usually applied in Bankers Rule.

Example: 0.25 year is equivalent to 0.25 x 12 = 3 months. : Convert 2.6 yrs in terms of the no of months & semiannual pds.
To convert the no of yrs to semiannual pds, multiply by 12

2.6 x12 = 31.2 or 31 1/5 months

To convert the no of yrs to semiannual pds, multiply by 2

2.6 x 2 = 5.2 semiannual pds

Converting 1.15 yrs in months

1.15 x 12 = 13.8, 13 8/10, or 13 4/5 months

Interest Rates 2 Kinds of Interest Rates Since the no. of days D is expressed in 2 ways, then there are 2 varieties of interest rates. a) Exact Interest for D days, D Ie = Pr ______ 365

b) Ordinary Interest for D days,

D I o = Pr ___ 360

Time Between 2 dates 1. Actual Time - no. of days is obtained by counting all the days, inclusive betwn 2 given dates including the last day but not the 1st day. 2. Approximate Time - assumes that every months counts 30 days Interest Rate Betwn 2 Dates 4 Varieties : 1. Ordinary Interest at actual no. of days = Io Io = Prt
1 o 1 1

= Pr ( Actual time ) 360

2. Ordinary Interest at approximate no. of days = Io Io = Prt o = Pr ( Approximate time ) 2 2 360

3. Exact Interest at actual no of days = Ie1 Ie = Prt e = Pr ( Actual time ) 1 1 365

4. Exact Interest at approx. no. of days = I e2 I e = Prt

2

e2

= Pr (Approximate time ) 365

Chapter 9

SIMPLE DISCOUNTS

Chapter 9 : SIMPLE DISCOUNTS

Principal & Discount Discounts on amt. F. To find the present value P of F means to discount F for t years. The discount denoted by I on the amt F is defined as the difference between the future value F & its resent value P, that is I= F - P I = interest on the present value P; discount on the amt F. The symbol I has 2 useful names. Interest on P Discount on F

I=

Simple Discount

The discount D on a given amt F at a discount rate d due at the end of t years is given by D = Fdt

The present value of P of F is P= FD = F - Fdt P = F (1-dt)

Promissory notes -Is a written promise done by a borrower to pay certain sum to the lender within a specified time. -Proceeds sum or amount the borrower receives.

Features of Promissory Notes 1. Date of the note date when the note is done

2. Maturity date date when the note is due

3. Term of the note length of time from the date of the note to the maturity date 4. Face Value principal amount stated on the note

5. Maturity Value principal plus interest

Relations Betwn Interest rate ( r ) & Discount Rate ( D )

D = Fdt, then P= F - D = F Fdt = F ( 1- dt ) Since P = F , then it follows that 1+rt F = F (1-dt ) 1+rt

1 = 1 - dt 1+rt
Solving for d, we get d= r 1+rt r= d . 1- dt

Solving for r gives