Funz corporation gives three weeks paid vacation to each employee who has worked

Question

Funz corporation gives three weeks paid vacation to each employee who has worked a the company for on year. Based on  studies of employee turnover and previous experience, management estimates that 65 percent of the employees will qualilfy for vacation pay this year. Assume that Funz's july payroll is $300,000 of which $20,000 is paid to employees on vacation. Figure the estimated employee vacation benefit for the month. Round all intermediate calculations to three decimal places. Assume there are 52 weeks in a year.

Explanation / Answer

Answer question

Funz's july Payroll is $300,000 of which $20,000 is paid to employees on vacation.

The cost of the two weeks' vacation should be allocated as an expense over the year so that

month-to-month costs will not be distorted. The vacation pay represents 4 percent (three week's vacation divided by 49 weeks)

of employee's pay.

The computation of vacation pay expense based on the payrll of employees not on vacation ($300,000 - $20,000) is as follows:

$280,000x 6percent x 65 percent = $10,920

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