A contractor's total payroll for the quarter is $180,000. The workers' compensation rate is $6.75 per $100 of payroll. What is the quarterly premium?
Correct Answer
A) $12,150
Premium = ($180,000 ÷ $100) × $6.75 = 1,800 × $6.75 = $12,150
Why This Is the Correct Answer
The formula is: (Total Payroll ÷ 100) × Rate. Here: ($180,000 ÷ 100) × $6.75 = 1,800 × $6.75 = $12,150. This is the standard workers' compensation premium calculation used across contractor licensing exams.
Why the Other Options Are Wrong
Option B: $11,350
$11,350 results from an arithmetic error — possibly using an incorrect payroll figure or rate. Check the calculation: 1,800 × $6.75 = $12,150, not $11,350.
Option C: $12,500
$12,500 is slightly higher than correct. This might result from rounding up incorrectly or using a slightly inflated rate. The exact calculation yields $12,150.
Option D: $11,800
$11,800 is another plausible but incorrect result from miscalculation. Always verify: divide payroll by 100 first, then multiply by the rate.
Memory Technique
Workers' comp formula: 'Per hundred, then multiply.' Divide total payroll by $100 to get your units, then multiply by the rate. $180,000 ÷ 100 = 1,800 units × $6.75 = $12,150.
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