A Sarasota estimator has total estimated cost of $250,000 and the company requires a 20% markup on cost. What sales price is needed?
Correct Answer
C) $300,000
A 20% markup on cost adds $50,000 to the $250,000 cost, producing a $300,000 price.
Why This Is the Correct Answer
A 20% markup on cost adds $50,000 to the $250,000 cost, producing a $300,000 price.
Why the Other Options Are Wrong
Option A: $280,000
$280,000 is below the supported result for markup on cost; it likely uses the wrong base, period, or account bucket.
Option B: $290,000
$290,000 is below the supported result for markup on cost; it likely uses the wrong base, period, or account bucket.
Option D: $312,500
$312,500 is above the supported result for markup on cost; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Two shelves for markup on cost: cost side first or price side first.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section One, Planning for Profits, The Relationship Between Volume and Profit; use the job ledger figures in the stem and recompute the same accounting measure.
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