A contractor is tracking costs for a commercial project with a contract value of $500,000. To date, costs incurred are $320,000 and the project is estimated to be 70% complete. What is the projected total cost at completion using the percent complete method?
Correct Answer
A) $457,143
Using the percent complete method: $320,000 ÷ 0.70 = $457,143 projected total cost. This method assumes current cost efficiency will continue through project completion.
Why This Is the Correct Answer
The percent complete method calculates projected total cost by dividing actual costs incurred by the percentage of work completed. With $320,000 spent at 70% completion, the formula is $320,000 ÷ 0.70 = $457,143. This method assumes the current cost efficiency rate will remain constant for the remainder of the project. It's a standard project management technique for forecasting final costs based on current performance.
Why the Other Options Are Wrong
Option B: $475,000
This answer ($465,000) appears to use an incorrect calculation method, possibly adding a fixed amount to current costs rather than using the percent complete formula. It doesn't follow the standard percent complete methodology.
Option C: $465,000
This answer ($485,000) is significantly higher than the correct calculation and indicates a fundamental misunderstanding of the percent complete method, possibly confusing it with other cost projection techniques.
Option D: $485,000
This answer ($475,000) is too high and suggests an incorrect calculation approach, possibly using a different cost projection method or mathematical error in the percent complete formula.
Memory Technique
Remember 'PCP' - Percent Complete Projection: divide actual costs BY the percent complete (as decimal) to get projected total.
Reference Hint
Look up 'Project Cost Control' or 'Earned Value Management' sections in construction management references, typically found in project management chapters.
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