Business FinancesQuestion 328 of 1605
A contractor wants to keep a cash reserve equal to 2 months of fixed overhead. If monthly fixed overhead is $14,000, how large should the reserve be?
a.$7,000
b.$14,000
c.$16,000
d.$28,000
Explanation
Cash reserve = 2 × Monthly Fixed Overhead = 2 × $14,000 = $28,000. Maintaining a reserve helps the contractor cover overhead during slow periods or payment delays.
Practice all 1605 questions free — no signup required.
Related questions on this topic
- Beyond an employee's gross wages, a contractor must also budget for the employer's share of payroll taxes. This additional cost is commonly referred to as:
- A worker is paid a base wage of $30 per hour. With a labor burden of 35%, what is the fully burdened hourly cost the contractor should use for estimating?
- A contractor wins a job for $300,000 and incurs total costs of $264,000. What is the profit margin on the selling price?
- Accounts payable on a contractor's balance sheet represents:
- A contractor finances a $24,000 piece of equipment with a 4-year loan at 7% simple annual interest. What is the total interest paid over the life of the loan?
- A contractor's progress payment application bills $80,000 of completed work. The owner withholds 10% retention. How much cash will the contractor actually receive on this payment?
Last reviewed: · editorial process
Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)