A time and materials contract specifies labor at $85/hour and materials at cost plus 15%. If 40 hours of labor and $8,000 in materials are used, what is the total billing?
Correct Answer
A) $13,200
Labor cost: 40 hours × $85/hour = $3,400. Material cost: $8,000 × 1.15 = $9,200. Total billing: $3,400 + $9,200 = $12,600. Wait, let me recalculate: $8,000 + ($8,000 × 0.15) = $8,000 + $1,200 = $9,200. Total: $3,400 + $9,200 = $12,600. The answer should be $12,600, but that's option B. Let me check again: $9,200 + $3,400 = $12,600. Actually, $8,000 × 1.15 = $9,200, and $9,200 + $3,400 = $12,600. There seems to be an error in my calculation setup.
Why This Is the Correct Answer
The correct answer is actually B) $12,600, not C) $13,200 as stated. The calculation shows labor cost of $3,400 (40 hours × $85/hour) plus material cost of $9,200 ($8,000 × 1.15 for the 15% markup) equals $12,600 total. The explanation provided correctly calculates to $12,600 but incorrectly identifies this as option C when it's actually option B.
Why the Other Options Are Wrong
Option C: $14,200
$14,200 is significantly higher than the correct answer and likely results from a major calculation error, possibly double-counting markup or using an incorrect hourly rate
Option D: $12,400
$12,400 is incorrect because it likely represents an error in calculating the material markup, possibly using only a 10% markup ($8,000 × 1.10 = $8,800) plus labor ($3,400) which would give $12,200, or some other calculation error
Memory Technique
Remember 'T&M = Time + Materials': Time (hours × rate) + Materials (cost × markup multiplier). For percentages, convert to multiplier (15% markup = 1.15 multiplier).
Reference Hint
Florida Building Construction Standards - Chapter on Contract Types and Pricing Methods, or Construction Contracting Business and Law section covering Time and Materials contracts
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