A job has a contract value of $500,000 with costs to date of $300,000 and estimated costs to complete of $150,000. Using the percentage-of-completion method, what percentage of the job is complete?
Correct Answer
B) 67%
Percentage complete = Costs to date ÷ Total estimated costs. Total estimated costs = $300,000 + $150,000 = $450,000. $300,000 ÷ $450,000 = 66.7% or approximately 67%.
Why This Is the Correct Answer
The percentage-of-completion method calculates project completion based on costs incurred versus total estimated costs, not contract value. The formula is: Costs to date ÷ Total estimated costs. Total estimated costs equals costs to date ($300,000) plus estimated costs to complete ($150,000) = $450,000. Therefore, $300,000 ÷ $450,000 = 0.667 or 67%.
Why the Other Options Are Wrong
Option A: 60%
60% incorrectly uses the contract value in the calculation ($300,000 ÷ $500,000 = 60%), but percentage-of-completion is based on costs, not contract value.
Option C: 75%
75% appears to use an incorrect total cost figure, possibly excluding some costs or using the wrong denominator in the calculation.
Option D: 80%
80% significantly overstates the completion percentage and doesn't align with any logical calculation using the given figures.
Memory Technique
Remember 'CTC' - Costs To Complete: Add costs to date + costs to complete for your denominator, then divide costs to date by that total.
Reference Hint
Look up 'Percentage-of-Completion Method' or 'Project Accounting' in construction management or accounting sections of your reference materials.
More Business & Finance Questions
A contractor's license expires on March 31st. If they submit a renewal application on April 15th, what additional requirement must be met under Florida regulations?
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
In Florida, what is the minimum workers' compensation insurance coverage required for construction companies with employees?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?