A contractor has 15 employees with varying wage rates. The total monthly payroll is $52,000. If the workers' compensation rate is $4.25 per $100 of payroll, what is the monthly premium?
Correct Answer
C) $2,210
Monthly premium = ($52,000 ÷ $100) × $4.25 = 520 × $4.25 = $2,210
Why This Is the Correct Answer
Premium = (Payroll ÷ $100) × Rate = ($52,000 ÷ $100) × $4.25 = 520 × $4.25 = $2,210. The varying individual wage rates and the number of employees are irrelevant — only the total payroll figure is used in the calculation.
Why the Other Options Are Wrong
Option A: $2,470
$2,470 would require a payroll of approximately $58,118 at this rate, or a higher rate on the given payroll. It does not match $52,000 × ($4.25/100).
Option B: $2,340
$2,340 would require a payroll of approximately $55,059 at $4.25/$100. This is a distractor close to the right answer but does not result from the given figures.
Option D: $2,080
$2,080 would require a payroll of approximately $48,941, which is less than the stated $52,000. This is a below-the-correct-answer distractor.
Memory Technique
Ignore the noise — 'varying wage rates' and '15 employees' are distractors. The formula only needs total payroll and rate. 520 units × $4.25 = think of it as 500 × $4.25 ($2,125) + 20 × $4.25 ($85) = $2,210.
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