Business FinancesQuestion 1217 of 1632
A contractor's bid includes $30,000 labor, $25,000 materials, $15,000 subs, and a 20% markup on the total direct cost. What is the bid price?
a.$84,000
b.$70,000
c.$14,000
d.$87,500
Explanation
Direct cost is $30,000 + $25,000 + $15,000 = $70,000, the markup is 20 percent of that, $14,000, and the bid is $84,000. $70,000 is the direct cost with the markup left off. $14,000 is the markup on its own. $87,500 comes from treating the 20 percent as a margin on the selling price and dividing by 0.80 instead of multiplying by 1.20, which is the markup-versus-margin error.
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