A Niceville project has expected revenue of $2,240,000 and expected cost of $1,680,000. If it is 35% complete, what gross profit is earned to date?
Correct Answer
C) $196,000
Earned gross profit is total expected gross profit multiplied by percent complete.
Why This Is the Correct Answer
Earned gross profit is total expected gross profit multiplied by percent complete.
Why the Other Options Are Wrong
Option A: $560,000
$560,000 is above the supported result for earned gross profit; it likely adds an unsupported amount or compares the wrong financial base.
Option B: $156,800
$156,800 is below the supported result for earned gross profit; it likely uses the wrong base, period, or account bucket.
Option D: $235,200
$235,200 is above the supported result for earned gross profit; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Earned Gross Profit drawer for Accountant Checks: label expected before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section One, Accounting Methods, Percentage-of-Completion Method; use the job ledger figures in the stem and recompute the same accounting measure.
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