A project has a contract value of $850,000 with 10% retainage. If $680,000 worth of work has been completed and approved, what is the amount due to the contractor?
Correct Answer
C) $612,000
The contractor receives 90% of completed work ($680,000 × 0.90 = $612,000). The remaining 10% ($68,000) is held as retainage until project completion or substantial completion as specified in the contract.
Why This Is the Correct Answer
With 10% retainage, the contractor receives 90% of completed and approved work. The calculation is straightforward: $680,000 (completed work) × 0.90 = $612,000. The remaining 10% ($68,000) is withheld as retainage until project completion or substantial completion as specified in the contract terms.
Why the Other Options Are Wrong
Option A: $680,000
$680,000 represents the full value of completed work without accounting for retainage. This ignores the 10% retention requirement, which is a standard contract provision to ensure project completion and quality.
Option B: $612,500
$612,500 appears to be a calculation error. This amount doesn't correspond to any logical percentage of the completed work value and suggests incorrect mathematical computation of the retainage calculation.
Option D: $765,000
$765,000 exceeds the completed work value of $680,000, making it mathematically impossible. This suggests confusion about what amount the percentage should be applied to in retainage calculations.
Memory Technique
Remember 'RETAIN 10, PAY 90' - when there's 10% retainage, the contractor gets paid 90% of completed work immediately.
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