Business FinancesQuestion 1202 of 1632
A contractor's job had estimated direct costs of $40,000 but actual costs of $46,000. He bid a fixed price of $50,000. What was his actual gross profit?
a.$6,000
b.$10,000
c.$4,000
d.$14,000
Explanation
Actual gross profit is the fixed price less the actual cost: $50,000 - $46,000 = $4,000. $10,000 is the estimated gross profit, $50,000 - $40,000, which the overrun destroyed. $6,000 is the overrun itself, the gap between estimate and actual cost, not a profit. $14,000 comes from adding the overrun to the estimated profit instead of subtracting it.
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 markup that covers BOTH overhead and profit is sometimes called:
- A contractor bills $75,000 on a job. The contract requires 5% retention and the owner also back-charges $1,500 for a utility relocation. How much will the contractor receive on this billing?
- Which is the best reason to separate business and personal bank accounts?
- A contractor pays $1,200/month for general liability insurance and $2,000/month office rent. These are examples of:
- A subcontractor invoices $9,000 including $600 of California sales tax on materials. On a lump-sum construction contract where the sub is the consumer, the sales tax is:
- A contractor's current assets are $90,000 and current liabilities are $120,000. His working capital is:
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)