A contractor has a project with original contract amount of $800,000. Change orders have added $75,000 to the contract. Costs incurred to date are $525,000, and the project is 65% complete. What is the estimated total cost at completion?
Correct Answer
A) $807,692
If the project is 65% complete and costs incurred are $525,000, then estimated total cost = $525,000 ÷ 0.65 = $807,692. This assumes the current cost-to-completion ratio will continue for the remaining work.
Why This Is the Correct Answer
The correct answer uses the earned value method to project total costs based on current performance. Since the project is 65% complete with $525,000 in costs incurred, dividing the actual costs by the percentage complete gives the estimated total cost at completion. This calculation assumes the cost performance will remain consistent for the remaining 35% of the work. The formula is: Estimated Total Cost = Actual Costs to Date ÷ Percent Complete.
Why the Other Options Are Wrong
Option B: $875,000
This is simply the revised contract value ($800,000 + $75,000 = $875,000) and doesn't account for the actual cost performance. Contract value and estimated cost at completion are different metrics - the contract value is what you'll be paid, while estimated cost is what you'll spend.
Option D: $341,250
This represents the remaining work value (35% of $875,000 = $306,250) or possibly a miscalculation. It's far too low to represent total project costs and doesn't use the actual cost data provided.
Memory Technique
Remember 'APC' - Actual costs ÷ Percent Complete = total cost estimate. Think 'A Projected Cost' to remember the formula order.
Reference Hint
Look up 'Project Cost Control' or 'Earned Value Management' in construction management chapters, typically found in business practices sections.
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