Calculate the North Carolina workers compensation premium for a framing contractor with a $280,000 annual payroll. The rate for carpentry work is $8.50 per $100 of payroll. What is the annual premium?
Correct Answer
A) $23,800
Premium = ($280,000 ÷ $100) × $8.50 = 2,800 × $8.50 = $23,800
Why This Is the Correct Answer
Workers' comp premiums are calculated as: (Payroll ÷ 100) × Rate. Here: ($280,000 ÷ 100) × $8.50 = 2,800 × $8.50 = $23,800. This is the standard workers' comp premium formula used across all states.
Why the Other Options Are Wrong
Option B: $21,800
$21,800 likely results from using an incorrect rate or making an arithmetic error. There is no combination of the given numbers that yields this figure correctly.
Option C: $25,800
$25,800 may result from using a rate of approximately $9.21 per $100, which is not the given rate. This is a distractor close to the correct answer.
Option D: $27,800
$27,800 would require a rate of approximately $9.93 per $100 — again not the stated rate. This too is a nearby distractor designed to catch arithmetic errors.
Memory Technique
The formula is 'Per Hundred': WC Premium = (Payroll / 100) × Rate. Think of the rate as 'cents per dollar of payroll' — $8.50 per $100 means you pay $8.50 for every $100 in wages. Divide first, then multiply.
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