Business FinancesQuestion 502 of 1632
A contract has a total contract price of $500,000 and an estimated total cost of $400,000. To date, the contractor has incurred $300,000 in actual cost and billed the owner $360,000. Using the cost-to-cost percentage-of-completion method, what is the percent complete and the revenue earned to date?
a.60% complete; $300,000 earned
b.72% complete; $360,000 earned
c.75% complete; $375,000 earned
d.80% complete; $400,000 earned
Explanation
Percent Complete = Cost Incurred ÷ Estimated Total Cost = $300,000 ÷ $400,000 = 75%. Revenue Earned = 75% × $500,000 contract price = $375,000. Because billings ($360,000) are less than earned revenue ($375,000), the contract is under-billed by $15,000.
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