Utah Contractor Practice Exam

What is the selling price if direct costs are $7,200, with overhead at 12% and profit at 10%?

1. $9,230.77

2. $7,200.00

3. $12,900.72

4. $17,923.72

The correct answer is: $9,230.77

To determine the selling price given the direct costs, overhead, and profit margins, you first need to calculate the total costs. Direct costs amount to $7,200. Overhead is calculated as a percentage of these direct costs. In this case, overhead at 12% is computed as: Overhead = 12% of Direct Costs Overhead = 0.12 * $7,200 = $864 Next, to find the total costs, you add the direct costs to the overhead: Total Costs = Direct Costs + Overhead Total Costs = $7,200 + $864 = $8,064 To incorporate profit, which is set at 10% of the total costs, you calculate it as follows: Profit = 10% of Total Costs Profit = 0.10 * $8,064 = $806.40 Now, add this profit to the total costs to find the selling price: Selling Price = Total Costs + Profit Selling Price = $8,064 + $806.40 = $8,870.40 However, to confirm the calculations align with the provided answer of $9,230.77, it’s important to check if the profit is being calculated as a