A material escalation clause allows a 6 percent adjustment on $84,000 of eligible steel. What additive adjustment is allowed?
Correct Answer
D) $5,040
The escalation adjustment is $84,000 x 0.06 = $5,040. Other choices use 5%, a rounded low value, or an unsupported higher percentage.
Why This Is the Correct Answer
The escalation adjustment is $84,000 x 0.06 = $5,040. Other choices use 5%, a rounded low value, or an unsupported higher percentage.
Why the Other Options Are Wrong
Option A: $4,200
escalation allowance, choice a: $4,200 backs into 70,000 when divided by 6 percent; the accepted setup gives 84,000 on that same base.
Option B: $4,800
escalation allowance, choice b: $4,800 backs into 80,000 when divided by 6 percent; the accepted setup gives 84,000 on that same base.
Option C: $5,600
escalation allowance, choice d: $5,600 backs into 5,283.02 when divided by 1.06; the accepted setup gives 4,754.72 on that same base.
Memory Technique
Say the escalation allowance rule aloud as a chain; the chain ends at $5,040, not an intermediate stop.
Reference Hint
Open Construction Project Management, 5th Ed. (2022); use the index entry or section for "Material escalation adjustment" to confirm that The escalation adjustment is $84,000 x 0.06 = $5,040.
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