Contracts & ExecutionQuestion 188 of 1632
On a fixed-price contract, the contractor's estimate was $100,000 but actual costs reached $112,000. The owner still pays only the agreed price. The contractor's profit or loss is:
a.A $12,000 profit
b.A $12,000 loss
c.Break-even, no profit or loss
d.Determined later by the owner
Explanation
In a fixed-price contract the price is locked. With costs of $112,000 and revenue of $100,000, the contractor absorbs a $12,000 loss; cost-risk falls entirely on the contractor.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)