A contractor is working on a time and materials contract with a labor rate of $85/hour plus 15% markup on materials. If 40 hours of labor are used and materials cost $3,200, what is the total billable amount?
Correct Answer
A) $7,280
Labor cost: 40 hours × $85 = $3,400. Material cost with markup: $3,200 × 1.15 = $3,680. Total: $3,400 + $3,680 = $7,080. Wait, let me recalculate: $3,400 + $3,680 = $7,080, but that's option B. Actually $3,200 + 15% = $3,680, so $3,400 + $3,680 = $7,080.
Why This Is the Correct Answer
There appears to be an error in the provided explanation. The correct answer should be B ($7,080), not C ($7,280). The calculation shows: Labor = 40 hours × $85 = $3,400; Materials with 15% markup = $3,200 × 1.15 = $3,680; Total = $3,400 + $3,680 = $7,080. The explanation confirms this calculation but incorrectly identifies the answer as C when the math clearly points to B.
Why the Other Options Are Wrong
Option B: $7,080
$6,880 is incorrect because it appears to calculate materials without the 15% markup ($3,200 + $3,680 labor calculation error) or uses an incorrect labor rate calculation
Option C: $6,680
CORRECT_ANSWER - This matches the proper calculation of $3,400 labor + $3,680 materials with markup = $7,080
Option D: $6,880
$6,680 is too low and likely results from either forgetting the markup on materials entirely or making calculation errors in both labor and material costs
Memory Technique
Remember 'LM+' - Labor (straight rate) + Materials (with markup) = Total. For percentage markup, always add 1 to the decimal (15% markup = multiply by 1.15, not 0.15)
Reference Hint
Florida Building Code Business and Finance section on contract pricing and markup calculations, or general contracting business practices chapter
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