Contracts & ExecutionQuestion 155 of 1632
A contractor needs a 25% gross margin on a job. If the direct costs are $30,000, what selling price achieves that margin?
a.$37,500
b.$40,000
c.$45,000
d.$24,000
Explanation
To find the price for a desired margin, divide cost by (1 - margin): $30,000 / (1 - 0.25) = $30,000 / 0.75 = $40,000. The $10,000 profit is 25% of the $40,000 price.
This topic, taught in full in the CSLB Law & Business guide. CSLB Law & Business — Complete Study Guide (2026) — PDF + EPUB, $24.99 · 14-day refund →
Practice all 1632 questions free — no signup required.
Own the complete CSLB Law & Business guide — PDF + EPUB, $24.99 →
Related questions on this topic
- A "guaranteed maximum price" (GMP) contract protects the owner because:
- A contractor's direct job costs are $80,000 and the contract sells for $100,000. What is the gross margin percentage on this job?
- A contractor wants a 30% markup on a job whose costs are $50,000. What selling price should the contractor bid?
- A bid includes $60,000 in labor and materials, $12,000 in overhead, and the contractor wants $8,000 profit. What is the total bid price?
- A contractor's annual overhead is $120,000 and projected annual direct job costs are $600,000. What overhead rate should be applied to each job's direct costs?
- A contractor's fixed overhead is $90,000 per year and the average gross profit margin on jobs is 30%. How much sales revenue is needed to break even on overhead?
Last reviewed: · editorial process
PrepPass team · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)