A building permit application shows construction costs of $150,000. If the permit fee is calculated at $8.50 per $1,000 of construction value, what is the permit fee?
Correct Answer
D) $1,275
The calculation is: ($150,000 ÷ $1,000) × $8.50 = 150 × $8.50 = $1,275. Building permit fees are typically calculated based on the total construction value of the project.
Why This Is the Correct Answer
Option A ($1,275) is correct because the permit fee calculation follows the standard formula: construction value divided by $1,000, then multiplied by the rate per thousand. $150,000 ÷ $1,000 = 150 units, and 150 × $8.50 = $1,275. This represents the proper application of per-thousand-dollar fee structures commonly used in building permit calculations.
Why the Other Options Are Wrong
Option A: $1,350
Option C ($1,350) is incorrect because it overestimates the permit fee. This amount might result from adding an extra fee component or miscalculating the rate as $9.00 per $1,000 instead of $8.50, leading to an inflated final cost.
Option C: $1,500
Option D ($1,500) is incorrect because it significantly overestimates the permit fee. This amount would result from using a rate of $10.00 per $1,000 instead of the specified $8.50 rate, representing a substantial calculation error.
Memory Technique
Remember 'Divide then Multiply': First divide construction cost by 1,000 to get units, then multiply by the rate per unit. Think 'D-M' for Dollar calculations.
More Business & Finance Questions
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?
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?
When establishing professional relationships with architects and engineers, what is the most important factor for a general contractor to consider?
A partnership agreement for a construction company should address all of the following EXCEPT:
A contractor purchases a truck for $60,000. After 5 years, it has accumulated depreciation of $35,000. What is the truck's book value?
A contractor's business plan projects first-year revenue of $500,000 with a 15% net profit margin. If actual revenue is $450,000 with the same profit margin, what is the variance in net profit?
Using the Modified Accelerated Cost Recovery System (MACRS), construction equipment is typically depreciated over how many years?
A contractor is comparing financing options for equipment purchase. Option A: $80,000 cash purchase. Option B: $20,000 down, $65,000 financed at 6% for 4 years. What is the total cost of Option B?
A contractor purchases equipment using a capital lease with a present value of $120,000. How should this be recorded on the balance sheet?