Business FinancesQuestion 1206 of 1605
A contractor wants each job to yield 15% net profit after covering 25% overhead (both measured on direct cost). On a $10,000 direct-cost job, what price recovers overhead and yields the target profit if both percentages are applied to direct cost?
a.$11,500
b.$15,000
c.$13,750
d.$14,000
Explanation
Overhead = 25% of $10,000 = $2,500. Profit = 15% of $10,000 = $1,500. Price = $10,000 + $2,500 + $1,500 = $14,000. (Applying both markups to direct cost is a simple method; note the resulting margin on price is $4,000 / $14,000 = 28.6%.)
Practice all 1605 questions free — no signup required.
Related questions on this topic
- 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:
- Amortization is most similar to depreciation except that amortization applies to:
- A contractor's income statement shows revenue $400,000, cost of goods sold $280,000, and operating expenses $90,000. What is net income?
- The main financial risk of taking on a job much larger than a contractor's usual size is:
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)