Under NRS 624, a contractor must maintain workers' compensation insurance. If a contractor has 8 employees with an annual payroll of $480,000, and the rate is $3.50 per $100 of payroll, what is the annual premium?
Correct Answer
D) $16,800
Premium calculation: $480,000 ÷ 100 = 4,800 units × $3.50 = $16,800 annual premium.
Why This Is the Correct Answer
$16,800 is correct. The formula is: Annual payroll ÷ 100 × rate per $100. So $480,000 ÷ 100 = 4,800 units × $3.50 = $16,800. The number of employees (8) is given as context but is not used directly in premium calculation — payroll is the basis.
Why the Other Options Are Wrong
Option A: $21,600
$21,600 is incorrect. This could result from applying a higher rate or miscalculating the payroll units. For example, using $6.00/100 would yield ~$28,800, or mistakenly adding the number of employees into the formula.
Option B: $14,400
$14,400 is incorrect. This could result from using a rate of $3.00 per $100 ($480,000 ÷ 100 × $3.00 = $14,400), which is lower than the stated $3.50 rate.
Option C: $18,200
$18,200 is incorrect. This does not correspond to any straightforward calculation using the given figures and is likely a distractor designed to catch rounding errors.
Memory Technique
Workers' comp premium = (Payroll ÷ 100) × Rate. Think of it as 'per hundred dollars of payroll.' Divide first, then multiply. The employee count is just background info — ignore it during the math.
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