A contractor employs 5 workers on a residential project. The total weekly payroll is $4,200. If the workers' compensation rate is $8.50 per $100 of payroll, what is the weekly premium?
Correct Answer
C) $357.00
Weekly premium = ($4,200 ÷ $100) × $8.50 = 42 × $8.50 = $357.00
Why This Is the Correct Answer
Workers' comp premiums are calculated per $100 of payroll: ($4,200 ÷ $100) × $8.50 = 42 units × $8.50 = $357.00. The number of workers (5) is already reflected in the total payroll figure and is not used separately in the calculation.
Why the Other Options Are Wrong
Option A: $42.00
$42.00 results from stopping at the intermediate step ($4,200 ÷ $100 = 42) without multiplying by the rate ($8.50). This is an incomplete calculation — 42 is the number of payroll units, not the premium.
Option B: $494.12
$494.12 appears to result from dividing the payroll by the rate ($4,200 ÷ $8.50 ≈ $494.12) rather than dividing by $100 then multiplying by the rate. This inverts the formula.
Option D: $35.70
$35.70 results from calculating $4,200 ÷ $100 × $8.50 but then dividing by 10, possibly confusing cents and dollars or misapplying a decimal. This is a decimal placement error on an otherwise correct approach.
Memory Technique
Workers' comp rate formula: Payroll ÷ 100 × Rate = Premium. Think of it as 'how many $100 chunks in the payroll, then price each chunk.' $4,200 gives you 42 chunks; at $8.50 per chunk = $357.
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