A contractor in North Carolina has 8 employees with a total annual payroll of $320,000. If the workers' compensation rate is $2.85 per $100 of payroll, what is the annual premium?
Correct Answer
C) $9,120
Annual premium = ($320,000 ÷ $100) × $2.85 = 3,200 × $2.85 = $9,120
Why This Is the Correct Answer
$9,120 is correct. The formula is: ($320,000 ÷ $100) × $2.85 = 3,200 × $2.85 = $9,120. The number of employees is irrelevant — workers' comp premiums are based on payroll, not headcount.
Why the Other Options Are Wrong
Option A: $8,320
$8,320 may result from an arithmetic error, such as using an incorrect divisor or applying the rate incorrectly. It does not match the correct formula result.
Option B: $9,920
$9,920 is a common distractor that might result from using a slightly higher base number. It is $800 above the correct answer and suggests a calculation error in the payroll base.
Option D: $8,640
$8,640 may result from using a different payroll figure or rate in the calculation, such as rounding the payroll units incorrectly.
Memory Technique
Workers' comp formula: Payroll ÷ 100 × Rate = Premium. Write it as (P/100) × R. For this problem: ($320,000/100) × $2.85 = 3,200 × 2.85 = $9,120.
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