A residential project requires a building permit fee of $450. The contractor adds a 15% markup for permit handling. What total amount should be charged to the homeowner for the permit?
Correct Answer
A) $517.50
$450 × 1.15 = $517.50. The contractor can charge the permit fee plus their markup for handling.
Why This Is the Correct Answer
$450 × 1.15 = $517.50. The calculation applies a 15% markup to the base permit fee: 15% of $450 is $67.50, and $450 + $67.50 = $517.50. Tennessee law permits contractors to mark up permit fees to cover the administrative cost of obtaining, tracking, and managing permits on the homeowner's behalf. This is a straightforward percentage markup problem.
Why the Other Options Are Wrong
Option B: $540.00
$540.00 results from applying a 20% markup ($450 × 1.20 = $540), not the 15% stated in the question. This is the most common arithmetic error — candidates who misread '15%' as '20%' will arrive at this figure.
Option C: $487.50
$487.50 results from applying a 8.33% markup (approximately $450 × 1.0833 ≈ $487.50) or from incorrectly computing 15% as $37.50 instead of $67.50. Some candidates mistakenly calculate 15% of $250 (half the permit fee) and add it, or perform an unrelated division error.
Option D: $465.00
$465.00 results from applying only a ~3.3% markup ($450 + $15 = $465), suggesting the candidate calculated 15% of $100 (getting $15) instead of 15% of $450 ($67.50). This is an order-of-magnitude error in computing the percentage base.
Memory Technique
Use the '10% + Half' mental math shortcut: 10% of $450 = $45. Half of that is $22.50. Add them: $45 + $22.50 = $67.50 markup. Then $450 + $67.50 = $517.50. This two-step approach is faster and less error-prone than multiplying $450 × 0.15 in your head.
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