A project has a total contract value of $150,000. If the contractor's workers' compensation premium is calculated at $4.25 per $100 of contract value, what is the total premium?
Correct Answer
B) $6,375
Premium = ($150,000 ÷ $100) × $4.25 = 1,500 × $4.25 = $6,375.
Why This Is the Correct Answer
The calculation is straightforward: divide the contract value by $100 to get the number of units, then multiply by the rate. $150,000 ÷ $100 = 1,500 units. 1,500 × $4.25 = $6,375. This is the correct workers' compensation premium for this project.
Why the Other Options Are Wrong
Option A: $6,475
$6,475 results from a calculation error, likely using a rate slightly higher than $4.25 (e.g., $4.317 per $100), or from an arithmetic mistake. Double-checking the multiplication confirms $6,375 is correct.
Option C: $6,275
$6,275 results from using a rate slightly lower than $4.25 (e.g., $4.183 per $100) or from a subtraction error in the final step. The given rate is $4.25, not a lower figure.
Option D: $6,575
$6,575 results from using a higher rate than $4.25 or from adding an extra amount incorrectly. The correct arithmetic yields $6,375.
Memory Technique
Set up the formula explicitly: (Total Contract ÷ 100) × Rate per $100. Think of it as 'how many $100 bills are in the contract, then multiply by the rate.' $150,000 has 1,500 hundred-dollar bills. 1,500 × $4.25 = $6,375.
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