A contractor's total payroll for the year is $480,000. If the Louisiana workers' compensation rate for construction is $8.50 per $100 of payroll, what is the annual premium?
Correct Answer
D) $40,800
$480,000 ÷ 100 = 4,800 units. 4,800 × $8.50 = $40,800 annual workers' compensation premium.
Why This Is the Correct Answer
Divide the payroll by 100 to find the number of units ($480,000 ÷ 100 = 4,800), then multiply by the rate ($8.50). 4,800 × $8.50 = $40,800. This is the standard formula for workers' compensation premium calculation.
Why the Other Options Are Wrong
Option A: $40,400
$40,400 is incorrect. This figure does not result from the correct formula and likely stems from a arithmetic error in the multiplication step.
Option B: $42,000
$42,000 is incorrect. This is a round number that might come from using an incorrect rate (e.g., $8.75 per $100) or miscounting the payroll units.
Option C: $41,200
$41,200 is incorrect. This figure does not result from the correct formula and likely reflects a rounding or multiplication error.
Memory Technique
Think of it as 'cents on the dollar': the rate ($8.50) applies to every $100 of payroll. So break payroll into $100 chunks first, then apply the rate. Formula: (Payroll ÷ 100) × Rate = Premium.
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