A contractor has a monthly payroll of $45,000 with a workers' compensation rate of $11.50 per $100 of payroll. What is the monthly premium?
Correct Answer
A) $5,175.00
Monthly premium = ($45,000 ÷ $100) × $11.50 = 450 × $11.50 = $5,175.00.
Why This Is the Correct Answer
Workers' comp premiums are calculated per $100 of payroll. Step 1: Divide payroll by 100 → $45,000 ÷ 100 = 450 units. Step 2: Multiply by the rate → 450 × $11.50 = $5,175.00. This is a standard workers' comp premium calculation.
Why the Other Options Are Wrong
Option B: $5,687.50
$5,687.50 would result from using a rate of approximately $12.64 per $100, which is not given. This may result from an arithmetic error such as multiplying $45,000 × 0.1264 or a similar miscalculation.
Option C: $4,612.50
$4,612.50 would result from using a rate of approximately $10.25 per $100 — not the stated $11.50. This is likely an error from rounding or misreading the rate.
Option D: $6,150.00
$6,150.00 would result from using a rate of approximately $13.67 per $100, well above the stated $11.50. This may stem from calculating $45,000 × 0.1367 or another arithmetic mistake.
Memory Technique
The formula: (Payroll ÷ 100) × Rate. Think of it as counting how many '$100 chunks' are in your payroll, then paying the rate for each chunk. $45,000 has 450 chunks × $11.50 = $5,175.
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