A General Contractor Class B in South Carolina has 12 employees with a total annual payroll of $480,000. Using the standard rate of $8.50 per $100 of payroll for construction work, what is the annual workers compensation premium?
Correct Answer
B) $40,800
Workers comp premium = ($480,000 ÷ $100) × $8.50 = 4,800 × $8.50 = $40,800
Why This Is the Correct Answer
The formula is (total payroll ÷ $100) × rate per $100. $480,000 ÷ $100 = 4,800 units × $8.50 = $40,800. This is the precise arithmetic application of the standard workers' comp premium calculation used in South Carolina for construction trades.
Why the Other Options Are Wrong
Option A: $42,400
$42,400 is incorrect. This figure does not result from the correct formula applied to $480,000 at $8.50 per $100. It may arise from using a slightly higher payroll base (e.g., ~$498,823) or from an arithmetic error.
Option C: $43,200
$43,200 is incorrect. This would result from applying a rate higher than $8.50, approximately $9.00 per $100. Confusing the rate or rounding up erroneously produces this wrong answer.
Option D: $41,600
$41,600 is incorrect. This figure could result from using a slightly different payroll number or rate, neither of which matches the given values. It is a distractor close to the correct answer.
Memory Technique
Think of the formula as: (Payroll ÷ 100) × Rate. 'Per $100' means you are buying coverage in $100 chunks. For $480,000 you have 4,800 chunks × $8.50 each = $40,800.
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