A scope is expected to cost $420,000. The contractor wants a 16% margin on selling price. What selling price is required?
Correct Answer
A) $500,000
Margin is based on selling price, so divide cost by one minus the margin rate.
Why This Is the Correct Answer
Margin is based on selling price, so divide cost by one minus the margin rate.
Why the Other Options Are Wrong
Option B: $487,200
$487,200 is below the supported result for markup versus margin; it likely uses the wrong base, period, or account bucket.
Option C: $493,600
$493,600 is below the supported result for markup versus margin; it likely uses the wrong base, period, or account bucket.
Option D: $512,000
$512,000 is above the supported result for markup versus margin; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Markup Versus Margin fence: markup starts at cost, margin looks back from price.
Reference Hint
Open-book path: tab Principles and Practices of Commercial Construction, 11th Edition, 2024 to Preconstruction estimating; margin on sales; match the role, timing, and required approval before choosing.
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