A subcontractor submits a payment application for $85,000. The contract specifies 10% retention until project completion. What amount should be paid?
Correct Answer
A) $76,500
With 10% retention, the payment amount = $85,000 × (100% - 10%) = $85,000 × 0.90 = $76,500. The $8,500 retention will be held until project completion.
Why This Is the Correct Answer
Option A is correct because retention calculations require multiplying the payment application amount by the percentage that will be paid (not retained). With 10% retention, 90% is paid immediately. The calculation is $85,000 × 0.90 = $76,500. The remaining $8,500 (10%) is held as retention until project completion or final acceptance.
Why the Other Options Are Wrong
Option C: $80,000
This amount doesn't correspond to any standard retention calculation and appears to be an arbitrary figure that doesn't follow the 10% retention requirement.
Option D: $78,000
This represents paying the full amount without any retention deduction, which violates the contract terms specifying 10% retention until completion.
Memory Technique
Remember 'R.P.M.' - Retention Percentage Minus (from 100%) = Payment percentage. Then multiply the application amount by the payment percentage.
Reference Hint
Florida Building Code Chapter 1, Section 107 - Fees and Permits, or contract administration sections in general contracting reference materials
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