In a cost-plus-fee contract with a 12% fee, if the actual project costs are $420,000 and there was a $15,000 cost overrun due to owner changes, what is the total amount due to the contractor?
Correct Answer
C) $487,200
Total costs including overrun: $420,000 + $15,000 = $435,000. Fee: $435,000 × 12% = $52,200. Total due: $435,000 + $52,200 = $487,200.
Why This Is the Correct Answer
In a cost-plus-fee contract, the contractor is reimbursed for all legitimate project costs plus a predetermined fee percentage. The total project costs include both the original costs ($420,000) and any approved cost overruns ($15,000), totaling $435,000. The 12% fee is calculated on the entire cost basis of $435,000, resulting in a fee of $52,200. The total amount due is the sum of all costs plus the fee: $435,000 + $52,200 = $487,200.
Why the Other Options Are Wrong
Option A: $472,200
This answer incorrectly calculates the fee on only the original project costs ($420,000 × 12% = $50,400) instead of on the total costs including overruns, resulting in $420,000 + $15,000 + $50,400 = $485,400, but shows as $472,200 which suggests a calculation error.
Option B: $485,400
This answer incorrectly calculates the fee on only the original project costs ($420,000 × 12% = $50,400) and adds it to the total costs including overrun ($420,000 + $15,000 + $50,400 = $485,400), but the fee should be calculated on the total costs including overruns.
Memory Technique
Remember 'TOTAL before FEE' - always calculate the fee percentage on the total project costs (including overruns), not just the original estimate.
Reference Hint
Look up contract types and payment methods in Chapter 4 (Project Management) or Chapter 6 (Construction Contracts) of your Florida contractor exam reference guide.
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