A contractor has 5 employees with a total monthly payroll of $18,000. Using the standard rate of $2.45 per $100 of payroll for their classification, what is their monthly workers' compensation premium?
Correct Answer
D) $441.00
Monthly payroll $18,000 ÷ $100 = 180 units. 180 × $2.45 = $441.00 monthly premium.
Why This Is the Correct Answer
Workers' compensation premiums are calculated by dividing the payroll by $100 and multiplying by the rate. Here: $18,000 ÷ $100 = 180 payroll units. 180 × $2.45 = $441.00. The number of employees (5) is irrelevant to the premium calculation — only total payroll dollars and the rate matter.
Why the Other Options Are Wrong
Option A: $367.20
$367.20 does not result from any correct application of the formula. It may result from using a different (incorrect) rate or applying the rate to the per-employee payroll rather than the total payroll.
Option B: $425.75
$425.75 also does not correspond to the correct calculation. It may stem from a rounding error or using an incorrect payroll base figure.
Option C: $490.50
$490.50 would result from multiplying 180 units × $2.725 (an incorrect rate), or from a payroll figure of $20,020. This is a plausible distractor if the candidate mis-reads the rate.
Memory Technique
The workers' comp formula: Payroll ÷ 100 × Rate. Drop two zeros from the payroll ($18,000 → 180), then multiply by the rate ($2.45). 180 × 2.45 = 441. Easy as dropping zeros and multiplying.
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A contractor files a preliminary 20-day notice on January 15th for work that began on January 10th. The preliminary notice was delivered to the owner on January 18th. Under A.R.S. 33-981, is this notice valid for lien purposes?