A contractor's employee in Georgia earns $52,000 annually. If the workers' compensation rate for construction is $8.50 per $100 of payroll, what is the annual workers' compensation premium for this employee?
Correct Answer
C) $4,420
Premium = ($52,000 ÷ $100) × $8.50 = 520 × $8.50 = $4,420
Why This Is the Correct Answer
The premium is calculated by dividing the total payroll by $100, then multiplying by the rate: ($52,000 ÷ $100) × $8.50 = 520 × $8.50 = $4,420. This is the standard formula used by insurers and required by Georgia law.
Why the Other Options Are Wrong
Option A: $4,160
$4,160 is incorrect. This would result from using a rate of approximately $8.00 per $100, not $8.50 — a common arithmetic slip when rounding the rate down.
Option B: $4,250
$4,250 is incorrect. This equals 520 × $8.17, which doesn't correspond to the stated $8.50 rate. It may result from miscalculating the payroll base or misapplying the formula.
Option D: $4,680
$4,680 is incorrect. This would require a rate of $9.00 per $100, not $8.50. Candidates who round up the rate or confuse it with a different class code may arrive at this figure.
Memory Technique
Think of it as buying units: each $100 of payroll is one 'unit' that costs $8.50. $52,000 payroll = 520 units × $8.50/unit = $4,420. The phrase 'per hundred' is your cue to divide first.
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