During contract administration, a change order increases the project scope by $15,000. The original contract included a 15% markup on change orders. What is the total amount to be added to the contract?
Correct Answer
C) $17,250
The change order amount includes the base cost plus markup: $15,000 + ($15,000 × 0.15) = $15,000 + $2,250 = $17,250. This covers both the direct costs and the contractor's overhead and profit on the additional work.
Why This Is the Correct Answer
Option B correctly applies the 15% markup to the base change order amount. When a contract specifies a markup percentage on change orders, this percentage must be applied to the base cost to determine the total contract addition. The calculation is straightforward: base cost ($15,000) plus markup ($15,000 × 0.15 = $2,250) equals $17,250 total. This markup covers the contractor's overhead and profit on the additional work scope.
Why the Other Options Are Wrong
Option B: $16,500
Option C of $16,500 represents only a 10% markup ($15,000 + $1,500), which is incorrect since the contract specifically states a 15% markup.
Option D: $15,000
Option D of $18,750 represents a 25% markup ($15,000 + $3,750), which exceeds the contractually agreed upon 15% markup rate.
Memory Technique
Remember 'Base + Bonus' - the base cost plus the bonus (markup) equals the total contract addition
Reference Hint
Florida Building Code - Administrative Chapter 1, Section on Contract Administration and Change Orders
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