Utah Contractor Practice Exam

If a job has direct costs of $10,000, overhead at 15%, and a desired profit of 10%, how much is the selling price?

1. $11,000

2. $12,500

3. $13,000

4. $14,500

The correct answer is: $12,500

To calculate the selling price, you need to account for both direct costs and the additional expenses related to overhead and profit. First, start with the direct costs, which are $10,000. From this amount, you will need to determine the overhead cost. Overhead is calculated as a percentage of the direct costs. In this case, at a rate of 15%, the overhead cost would be: \[ \text{Overhead} = \text{Direct Costs} \times \text{Overhead Rate} = 10,000 \times 0.15 = 1,500 \] Next, add the overhead to the direct costs to find the total cost before profit: \[ \text{Total Cost} = \text{Direct Costs} + \text{Overhead} = 10,000 + 1,500 = 11,500 \] Now, to determine the desired profit, you calculate it as a percentage of the total cost. The desired profit is 10% of $11,500: \[ \text{Desired Profit} = \text{Total Cost} \times \text{Profit Rate} = 11,500 \times 0.10 =