Utah Contractor Practice Exam

What is the selling price if direct costs are $37,000, with overhead at 12% and profit at 5%?

1. $40,587.32

2. $42,875.31

3. $44,578.31

4. $48,785.32

The correct answer is: $44,578.31

To determine the selling price based on direct costs, overhead, and profit, you can use the following formula: Selling Price = Direct Costs + Overhead + Profit First, calculate the overhead: Overhead = Direct Costs × Overhead Rate Overhead = $37,000 × 12% Overhead = $4,440 Next, calculate the profit: Profit = Direct Costs × Profit Rate Profit = $37,000 × 5% Profit = $1,850 Now, add the direct costs, overhead, and profit together to find the selling price: Selling Price = Direct Costs + Overhead + Profit Selling Price = $37,000 + $4,440 + $1,850 Selling Price = $43,290 This calculation seems to indicate a potential discrepancy with the provided options. Upon reviewing typical rounding and calculation practices, options often reflect assumptions made during the calculation process, such as how profit may be considered on a total that includes overhead. If the profit is calculated on the total of direct costs and overhead prior to the final selling price, the calculation would change slightly: Total Costs (Direct + Overhead) = $37,000 + $4,440 = $41,440