A negotiated scope has expected cost of $785,400. The contractor requires 15% margin on sales. What selling price is required?
Correct Answer
A) $924,000
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: $903,210
$903,210 is below the supported result for margin on sales; it likely uses the wrong base, period, or account bucket.
Option C: $931,925
$931,925 is above the supported result for margin on sales; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $959,350
$959,350 is above the supported result for margin on sales; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Margin On Sales 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 pricing; margin on selling price; verify the quantity, approval point, notice rule, or field record before answering.
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