A contractor needs 15,000 board feet of lumber. The supplier quotes $4.25 per board foot with a 5% discount for orders over 10,000 board feet and 2% additional discount for payment within 10 days. What is the total cost if both discounts apply?
Correct Answer
A) $59,456.25
Base cost: 15,000 × $4.25 = $63,750. After 5% discount: $63,750 × 0.95 = $60,562.50. After additional 2% discount: $60,562.50 × 0.98 = $59,456.25.
Why This Is the Correct Answer
The correct answer applies both discounts sequentially to the base cost. First, the 5% volume discount is applied to the original amount, then the 2% early payment discount is applied to the already-discounted amount. This compound discount calculation results in a total cost of $59,456.25, which represents the maximum savings available to the contractor.
Why the Other Options Are Wrong
Option B: $60,562.50
This amount represents the cost after only applying the first 5% volume discount ($60,562.50) but fails to apply the additional 2% early payment discount that the contractor qualifies for.
Option C: $63,750.00
This is the base cost before any discounts are applied ($63,750), ignoring both the 5% volume discount and the 2% early payment discount that the contractor qualifies for.
Option D: $58,537.50
This amount appears to incorrectly calculate the discounts, possibly by adding the percentages together (7%) rather than applying them sequentially, or by making an arithmetic error in the calculation process.
Memory Technique
Remember 'Sequential Savings' - discounts stack on top of each other, so always multiply by the remaining percentage (95% then 98%) rather than subtracting the full percentages from 100%.
Reference Hint
Florida Building Construction Standards and Practices - Chapter on Cost Estimation and Material Calculations, or Business and Finance section covering discount calculations
More Contract Admin Questions
A project experiences a 30-day delay due to unusually severe weather. The contract includes a liquidated damages clause of $1,000 per day for delays. If the weather delay is excusable but not compensable, what liquidated damages apply?
A commercial project requires a total of 12 inspections. The building department charges $85 per inspection for the first 5 inspections, $65 for inspections 6-10, and $45 for any additional inspections. What is the total inspection fee?
What document must be posted at the job site before a Certificate of Occupancy can be issued for a commercial building?
A mixed-use development requires a variance for reduced setbacks. The property is located within 500 feet of a hospital. What additional consideration must be addressed?
A LEED project requires tracking of regional materials. Materials are considered regional if they are extracted, harvested, or recovered, as well as manufactured within what distance of the project site?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass
Previous Question
A contractor is estimating concrete for a foundation that measures 120 feet by 80 feet with a thickness of 8 inches. How many cubic yards of concrete are needed?
Next Question
During final closeout, the architect identifies $12,000 worth of punch list items. The contract retainage held is $45,000. The owner wants to release $30,000 of retainage and hold $15,000 pending completion of punch list work. Is this approach reasonable?