A contractor receives three material quotes: $12,500, $11,800, and $13,200. The middle quote vendor requests a 5% deposit with order. What is the total initial cash outlay for this material purchase?
Correct Answer
C) $590
The middle quote of $11,800 requires a 5% deposit. Deposit amount = $11,800 × 5% = $590. This represents the initial cash outlay required to place the order.
Why This Is the Correct Answer
The question asks for the initial cash outlay for the material purchase, which means the deposit required upfront. The contractor would logically choose the middle quote of $11,800 as it's the most reasonable option between the three quotes. The 5% deposit on this amount equals $11,800 × 0.05 = $590, which represents the immediate cash requirement to secure the materials.
Why the Other Options Are Wrong
Option A: $625
This would be 5% of $13,200 ($660), but the contractor should choose the middle quote of $11,800, not the highest quote of $13,200.
Option B: $660
This represents the full amount of the middle quote, not the 5% deposit required. The initial cash outlay is only the deposit, not the entire purchase price.
Option D: $11,800
This would be 5% of $12,500 ($625), but the contractor should choose the middle quote of $11,800, not the highest quote of $12,500.
Memory Technique
Remember 'MID-DEP': Choose the MIDdle quote, calculate the DEPosit percentage. Initial cash outlay = deposit only, not full amount.
Reference Hint
Florida Building Construction Standards and Practices - Chapter on Project Cost Estimation and Material Procurement
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