A contractor has the following for a project: Contract amount $400,000, Costs incurred $240,000, Estimated costs to complete $120,000. What percentage of the project is complete using the cost-to-cost method?
Correct Answer
D) 67%
Percentage complete = Costs incurred ÷ Total estimated costs. Total estimated costs = $240,000 + $120,000 = $360,000. Percentage complete = $240,000 ÷ $360,000 = 66.7% or 67%.
Why This Is the Correct Answer
The cost-to-cost method calculates project completion percentage by dividing costs incurred by total estimated project costs. Total estimated costs equal costs incurred ($240,000) plus estimated costs to complete ($120,000), which equals $360,000. Dividing costs incurred ($240,000) by total estimated costs ($360,000) gives 66.7%, which rounds to 67%.
Why the Other Options Are Wrong
Option A: 60%
75% would result from an incorrect calculation, possibly confusing the denominator or using wrong cost figures in the cost-to-cost formula.
Option C: 75%
60% would result from incorrectly dividing costs incurred ($240,000) by the contract amount ($400,000), which is not the cost-to-cost method formula.
Memory Technique
Remember 'CTC' - Cost-To-Cost method uses Costs incurred divided by Total Costs (incurred plus remaining costs to complete).
Reference Hint
Look up 'Percentage of Completion Method' or 'Cost-to-Cost Method' in accounting or project management sections of your reference materials.
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