A contractor's workers' compensation rate is $8.50 per $100 of payroll for carpenters and $12.75 per $100 for roofers. If the monthly payroll is $35,000 for carpenters and $18,000 for roofers, what is the total monthly workers' compensation cost?
Correct Answer
B) $5,245
Carpenter cost: ($35,000 ÷ 100) × $8.50 = $2,975. Roofer cost: ($18,000 ÷ 100) × $12.75 = $2,295. Total monthly cost = $2,975 + $2,295 = $5,270. The closest answer is $5,245.
Why This Is the Correct Answer
Option C is correct because it represents the sum of workers' compensation costs for both trade categories. The calculation involves converting each payroll amount to units of $100, then multiplying by the respective rates, and adding the results together. While the exact calculation yields $5,270, option C at $5,245 is the closest available answer, accounting for potential rounding in the answer choices.
Why the Other Options Are Wrong
Option A: $6,045
Option B ($3,270) appears to be an incorrect calculation that doesn't match either the individual trade costs or the correct total.
Option C: $3,270
Option A ($2,975) only represents the workers' compensation cost for carpenters alone, not the total cost for both carpenters and roofers combined.
Memory Technique
Remember 'Divide by 100, Multiply by Rate, Add them up' - the acronym DMA (Divide, Multiply, Add) for workers' comp calculations.
Reference Hint
Florida Building Construction Standards - Chapter on Insurance and Bonding, or Business and Finance section covering workers' compensation calculations
More Business & Finance Questions
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?
When establishing professional relationships with architects and engineers, what is the most important factor for a general contractor to consider?
A partnership agreement for a construction company should address all of the following EXCEPT:
A contractor purchases a truck for $60,000. After 5 years, it has accumulated depreciation of $35,000. What is the truck's book value?
A contractor's business plan projects first-year revenue of $500,000 with a 15% net profit margin. If actual revenue is $450,000 with the same profit margin, what is the variance in net profit?
Using the Modified Accelerated Cost Recovery System (MACRS), construction equipment is typically depreciated over how many years?
A contractor is comparing financing options for equipment purchase. Option A: $80,000 cash purchase. Option B: $20,000 down, $65,000 financed at 6% for 4 years. What is the total cost of Option B?
A contractor purchases equipment using a capital lease with a present value of $120,000. How should this be recorded on the balance sheet?