Estimated cost for a Groveland commercial job is $538,000 and the contractor applies a 24% markup on cost. What selling price should be quoted?
Correct Answer
A) $667,120
Markup on cost adds the stated percentage of cost to the estimated cost.
Why This Is the Correct Answer
Markup on cost adds the stated percentage of cost to the estimated cost.
Why the Other Options Are Wrong
Option B: $645,600
$645,600 is below the supported result for markup on cost; it likely uses the wrong base, period, or account bucket.
Option C: $683,260
$683,260 is above the supported result for markup on cost; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $707,895
$707,895 is above the supported result for markup on cost; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Estimator Checks money shelf: cost for markup, price for margin.
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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