Calculate the workers' compensation premium for a North Carolina framing contractor with $450,000 in annual payroll. The rate for carpentry work is $8.50 per $100 of payroll.
Correct Answer
C) $38,250
Premium = ($450,000 ÷ $100) × $8.50 = 4,500 × $8.50 = $38,250.
Why This Is the Correct Answer
The correct answer is C ($38,250). The calculation is: ($450,000 ÷ $100) × $8.50 = 4,500 × $8.50 = $38,250. The rate is expressed per $100 of payroll, so dividing total payroll by 100 gives the number of 'units,' which is then multiplied by the rate.
Why the Other Options Are Wrong
Option A: $35,250
$35,250 is incorrect. This may result from using a slightly lower payroll figure (e.g., $415,000 ÷ 100 × $8.50) or from an arithmetic error. The correct payroll of $450,000 divided by 100 gives exactly 4,500 units, not a smaller number.
Option B: $44,250
$44,250 is incorrect. This figure could arise from multiplying $450,000 by a higher-than-given rate (approximately $9.83 per $100), or from incorrectly adding the payroll to a partial premium. The given rate of $8.50 per $100 must be used as stated.
Option D: $41,250
$41,250 is incorrect. This appears to result from using a rate of approximately $9.17 per $100 instead of $8.50, or from a computational error in the payroll-to-units conversion. Always divide payroll by $100 first, then multiply by the rate.
Memory Technique
Workers' comp premium formula: 'Payroll per hundred, times the rate.' Move the decimal two places left on the payroll (÷100), then multiply by the rate. $450,000 → $4,500 → × $8.50 = $38,250. Think of it as: for every $100 you pay workers, you pay $8.50 in WC premium.
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