A $25,000 appliance allowance is reconciled to an approved actual cost of $31,000. The contract allows 10 percent markup on allowance overruns. What additive change is due?
Correct Answer
B) $6,600
The overrun is $31,000 - $25,000 = $6,000. With 10% markup, the additive change is $6,000 x 1.10 = $6,600. Other choices mark up the full actual cost, omit markup, or add allowance and actual cost.
Why This Is the Correct Answer
The overrun is $31,000 - $25,000 = $6,000. With 10% markup, the additive change is $6,000 x 1.10 = $6,600. Other choices mark up the full actual cost, omit markup, or add allowance and actual cost.
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