A $50,000 flooring allowance is included in the contract. The approved actual flooring cost is $43,500. What contract adjustment reconciles the allowance before markup terms?
Correct Answer
B) $6,500 deduct
The actual cost is $50,000 - $43,500 = $6,500 below the allowance, so the reconciliation is a $6,500 deduct before any contract markup terms. Other choices reverse the direction or use the full allowance.
Why This Is the Correct Answer
The actual cost is $50,000 - $43,500 = $6,500 below the allowance, so the reconciliation is a $6,500 deduct before any contract markup terms. Other choices reverse the direction or use the full allowance.
Why the Other Options Are Wrong
Option A: $6,500 add
allowance reconciliation, choice b: $6,500 add has the right arithmetic difference but the direction is reversed.
Option C: $43,500 deduct
allowance reconciliation, choice c: $43,500 gives $43,500 deduct. That calculation copies a listed value without completing the operation.
Option D: $50,000 add
allowance reconciliation, choice d: the number $50,000 add comes from $50,000 but stops before the calculation reaches $6,500 deduct.
Memory Technique
Remember allowance reconciliation as "base, adjustment, final unit"; the last unit should read $6,500 deduct.
Reference Hint
Open Construction Project Management, 5th Ed. (2022); use the index entry or section for "Allowance reconciliation" to confirm that The actual cost is $50,000 - $43,500 = $6,500 below the allowance, so the reconciliation is a $6,500 deduct before any contract markup terms.
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