A contractor employs 8 workers in Louisiana. What is the annual workers' compensation insurance premium if the base rate is $8.50 per $100 of payroll and the total annual payroll is $480,000?
Correct Answer
B) $40,800
Premium calculation: ($480,000 ÷ $100) × $8.50 = 4,800 × $8.50 = $40,800 annual premium.
Why This Is the Correct Answer
Option B ($40,800) is correct. Workers' comp premium = (Total Payroll ÷ 100) × Rate per $100. Calculation: ($480,000 ÷ 100) × $8.50 = 4,800 × $8.50 = $40,800. The number of workers (8) is not used in this calculation — the premium is based solely on total payroll and the rate.
Why the Other Options Are Wrong
Option A: $35,400
$35,400 results from applying an incorrect rate (approximately $7.375 per $100 instead of $8.50) or from an arithmetic error in the multiplication step. Using the stated rate of $8.50 per $100 on $480,000 payroll yields $40,800.
Option C: $44,200
$44,200 results from using a higher rate (approximately $9.21 per $100) or from including irrelevant data (such as the 8 employees) in the calculation incorrectly. The correct formula with $8.50 rate gives $40,800.
Option D: $48,600
$48,600 results from applying an inflated rate (approximately $10.125 per $100) or from multiplying $8.50 by a number other than 4,800 payroll units. The correct payroll units are $480,000 ÷ 100 = 4,800.
Memory Technique
Workers' comp premium formula is universal across states: (Payroll ÷ 100) × Rate. Ignore employee count — it's always a red herring in premium calculation questions. $480,000 ÷ 100 = 4,800 units × $8.50 = $40,800.
More Louisiana Questions
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