In a time and materials contract, the contractor charges $85 per hour for labor with a 15% markup on materials. If 40 hours of labor were used and materials cost $2,400, what is the total contract amount?
Correct Answer
A) $6,160
Labor: 40 hours × $85 = $3,400. Materials with markup: $2,400 × 1.15 = $2,760. Total: $3,400 + $2,760 = $6,160.
Why This Is the Correct Answer
This is a straightforward time and materials calculation requiring two separate computations. First, calculate the labor cost by multiplying hours worked by the hourly rate (40 × $85 = $3,400). Second, calculate materials with markup by multiplying the base material cost by 1.15 to account for the 15% markup ($2,400 × 1.15 = $2,760). Finally, add both components together for the total contract amount ($3,400 + $2,760 = $6,160).
Why the Other Options Are Wrong
Option B: $6,400
This answer ($6,400) likely results from incorrectly calculating the markup as 20% instead of 15%, or from adding $2,400 + $4,000 without proper markup calculation.
Option C: $6,000
This answer ($6,000) appears to result from either forgetting to apply the 15% markup on materials entirely, or from miscalculating one of the components.
Option D: $6,240
This answer ($6,240) suggests an error in the markup calculation, possibly calculating 15% of $2,400 as $240 and adding it incorrectly, or making an arithmetic error in the final addition.
Memory Technique
Remember 'LM-TM': Labor + Materials = Time & Materials total. For markup, think '1 + the decimal' (15% = 1.15, 20% = 1.20, etc.) to avoid the common error of just adding the percentage.
Reference Hint
Florida Building Contractor Reference Manual - Chapter on Contract Types and Pricing Methods, specifically the section covering Time and Materials contracts
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