A contract holds a $15,000 warranty reserve and releases 80% after one year. What amount is released?
Correct Answer
C) $12,000
Released reserve is $15,000 x 80% = $12,000.
Why This Is the Correct Answer
Released reserve is $15,000 x 80% = $12,000.
Why the Other Options Are Wrong
Option A: $3,000
warranty reserve, choice a: $15,000 x 0.2 gives $3,000. That calculation follows multiplies those two listed numbers.
Option B: $8,000
warranty reserve, choice b: $8,000 backs into 10,000 when divided by 80%; the accepted setup gives 15,000 on that same base.
Option D: $18,000
warranty reserve, choice d: $18,000 backs into 22,500 when divided by 80%; the accepted setup gives 15,000 on that same base.
Memory Technique
Say the warranty reserve rule aloud as a chain; the chain ends at $12,000, not an intermediate stop.
Reference Hint
Open NASCLA Contractors Guide to Business, Law and Project Management, 14th Ed.; use the index entry or section for "warranty reserve" to confirm that Released reserve is $15,000 x 80% = $12,000.
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