A contractor has 8 employees with a total weekly payroll of $6,400. The workers' compensation premium rate is $2.50 per $100 of payroll. What is the weekly workers' compensation premium?
Correct Answer
A) $160.00
($6,400 ÷ $100) × $2.50 = 64 × $2.50 = $160.00 weekly premium.
Why This Is the Correct Answer
($6,400 ÷ $100) × $2.50 = 64 × $2.50 = $160.00. The rate expressed as 'per $100 of payroll' means you first find how many hundreds are in the payroll, then multiply by the rate.
Why the Other Options Are Wrong
Option B: $256.00
$256.00 results from multiplying the number of employees (8) by $2.50 and then by some factor, or from a miscalculation using the per-employee count rather than payroll units.
Option C: $128.00
$128.00 results from dividing $6,400 by $100 to get 64, then multiplying by $2.00 instead of $2.50 — a rate confusion error.
Option D: $192.00
$192.00 results from using a rate of $3.00 per $100 instead of $2.50, or from other arithmetic errors with the payroll base.
Memory Technique
Think of it as a unit conversion: payroll in dollars → payroll in 'hundreds' → multiply by rate per hundred. $6,400 ÷ 100 = 64 'units' of $100. Each unit costs $2.50. 64 × $2.50 = $160. The number of employees (8) is a distractor — ignore it.
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