A project has a contract value of $850,000. The owner retains 10% on each payment application. If the contractor has submitted applications totaling $680,000, what is the total amount of retainage being held?
Correct Answer
A) $68,000
Retainage is calculated as 10% of the payment applications submitted ($680,000 × 0.10 = $68,000). The total contract value is not relevant to calculating current retainage held.
Why This Is the Correct Answer
Retainage is calculated based on the actual payment applications submitted to date, not the total contract value. Since the contractor has submitted applications totaling $680,000 and the owner retains 10% on each payment application, the retainage held is $680,000 × 0.10 = $68,000. The total contract value of $850,000 is irrelevant for calculating current retainage because it represents future work not yet applied for payment.
Why the Other Options Are Wrong
Option B: $85,000
This incorrectly calculates retainage based on the total contract value ($850,000 × 0.10 = $85,000) rather than the actual payment applications submitted. Retainage is only held on work that has been completed and applied for payment.
Option C: $17,000
This appears to be calculating the difference between total contract retainage potential and current retainage ($85,000 - $68,000 = $17,000), which represents future retainage on unsubmitted work, not current retainage held.
Option D: $76,500
This calculation has no clear mathematical relationship to the given values and appears to be a distractor answer with no logical basis in retainage calculations.
Memory Technique
Remember 'SOAP' - Submitted Only Affects Payment retainage. Only calculate retainage on what's been submitted for payment, not the total contract.
Reference Hint
Florida Building Construction Standards - Chapter on Payment Procedures and Retainage Requirements
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