Material costs for lumber have increased 15% since the original estimate was prepared 3 months ago. The original lumber cost was $28,500. If lumber represents 12% of total project cost, what is the impact on the total project cost?
Correct Answer
C) $4,275 increase
Lumber cost increase: $28,500 × 15% = $4,275. This is the direct impact on total project cost since the increase only affects the lumber portion.
Why This Is the Correct Answer
The lumber cost increase is calculated as $28,500 × 15% = $4,275. This $4,275 represents the direct dollar impact on total project cost because only the lumber portion of the budget is affected by the price increase. The fact that lumber is 12% of total cost is background information confirming the proportion, not a factor in computing the increase amount.
Why the Other Options Are Wrong
Option A: $32,775 increase
$32,775 represents the new total lumber cost ($28,500 + $4,275), not the increase to total project cost. This is a common error of confusing the new subtotal with the incremental change.
Option B: $356 increase
$356 appears to result from applying 15% to 12% of the original lumber cost — a double application of the percentage figures. There is no basis for this calculation in the problem.
Option D: $4,275 total new cost
$4,275 as the 'total new cost' is incorrect — $4,275 is the increase, not the new lumber total. The new lumber total would be $28,500 + $4,275 = $32,775. This distractor tests whether candidates understand 'impact' (the delta) vs. 'new cost' (the revised total).
Memory Technique
Isolate the affected item first: lumber cost × rate of increase = dollar impact. The 12% figure tells you about relative size but does not change the math. $28,500 × 0.15 = $4,275.
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