A contractor has 8 employees with a total weekly payroll of $12,000. Using South Carolina's workers compensation rate of $3.50 per $100 of payroll for construction, what is the weekly premium?
Correct Answer
B) $420
Weekly premium = ($12,000 ÷ $100) × $3.50 = 120 × $3.50 = $420.
Why This Is the Correct Answer
The correct calculation is: $12,000 ÷ $100 = 120 units; 120 × $3.50 = $420. The number of employees (8) is irrelevant to the premium calculation — workers comp premiums are based on total payroll, not headcount.
Why the Other Options Are Wrong
Option A: $520
$520 does not result from any standard application of the given rate. It may result from arithmetic errors or using the employee count (8) incorrectly in the calculation.
Option C: $480
$480 results from applying an incorrect rate or a calculation error, such as using $4.00 per $100 instead of $3.50 (120 × $4.00 = $480). Read the stated rate carefully.
Option D: $342
$342 results from an incorrect calculation, possibly dividing $12,000 by a different factor or applying the rate to a subset of payroll. Always apply the rate to total payroll.
Memory Technique
Formula: (Total Payroll ÷ 100) × Rate = Premium. For this problem: (12,000 ÷ 100) × 3.50 = 120 × 3.50 = $420. Ignore headcount.
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