Business FinancesQuestion 1199 of 1605
A markup that covers BOTH overhead and profit is sometimes called:
a.Gross margin markup (overhead and profit, or O&P)
b.Contribution margin only
c.Depreciation
d.Retention
Explanation
Contractors commonly apply a combined markup on direct costs to recover both overhead and desired profit, often abbreviated O&P (overhead and profit). Understanding it prevents the trap of adding only profit and forgetting to recover overhead.
Practice all 1605 questions free — no signup required.
Related questions on this topic
- A change order adds $3,200 of direct cost to a job. If the contractor applies his standard 30% markup, how much should the change order add to the contract price?
- A written, signed change order is important because it:
- A contractor's equipment cost $18,000 and after 3 years of straight-line depreciation (6-year life, no salvage) its book value is:
- A contractor bills $75,000 on a job. The contract requires 10% 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's job had estimated direct costs of $40,000 but actual costs of $46,000. If he had bid a fixed price of $50,000, what was his actual gross profit, and how does it compare to the estimate?
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)