A Tennessee contractor's employee is injured on a job site. The contractor's workers' compensation premium is calculated at $8.50 per $100 of payroll. If the injured employee's annual salary is $48,000, what is the annual premium for this employee?
Correct Answer
D) $4,080
Premium calculation: ($48,000 ÷ $100) × $8.50 = 480 × $8.50 = $4,080.
Why This Is the Correct Answer
The calculation is: ($48,000 ÷ $100) × $8.50 = 480 × $8.50 = $4,080. This is the standard workers' comp premium formula applied correctly.
Why the Other Options Are Wrong
Option A: $4,800
$4,800 results from multiplying $48,000 × 0.10 (10%), not using the $8.50 per $100 rate. It ignores the correct rate structure.
Option B: $4,200
$4,200 does not result from any standard application of the given rate to the given salary. It is a plausible-looking distractor but has no mathematical basis here.
Option C: $4,320
$4,320 results from using a rate of $9.00 per $100 ($48,000 ÷ $100 × $9.00 = $4,320) rather than the stated $8.50 rate.
Memory Technique
Workers' comp premium = (Annual payroll ÷ 100) × Rate per $100. Think of it as: 'How many $100 chunks are in the payroll?' Then multiply by the rate for each chunk.
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