Business FinancesQuestion 1221 of 1632
A contractor's contract price is $100,000 with a 15% profit built in. Midway, unforeseen soil conditions add $12,000 of unrecoverable cost. What is the profit on the job now?
a.$3,000
b.$15,000
c.$0
d.$27,000
Explanation
The built-in profit is 15 percent of $100,000, or $15,000, and $12,000 of cost that cannot be recovered leaves $3,000. $15,000 is the profit as bid, which assumes the overrun never happened. $0 assumes any overrun wipes the profit out entirely, which would need $15,000 of extra cost, not $12,000. $27,000 comes from adding the overrun to the profit instead of subtracting it.
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