Utah Contractor Practice Exam

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If the direct costs of a job are estimated at $30,000, overhead is 20%, and the desired profit is 8%, what is the total bid amount?

$41,000
$4,666
$41,666
$14,666

The correct answer is: $41,666

To calculate the total bid amount for the job, you start by determining both the overhead costs and the profit based on the direct costs. First, the overhead costs are calculated as a percentage of the direct costs. With direct costs estimated at $30,000 and overhead being 20%, the overhead amount equals: \[ \text{Overhead} = 30,000 \times 0.20 = 6,000. \] Next, you calculate the profit, which is based on the sum of the direct costs and the overhead. To find the profit, first, you need to sum the direct costs and overhead: \[ \text{Total before profit} = \text{Direct costs} + \text{Overhead} = 30,000 + 6,000 = 36,000. \] Then, apply the desired profit margin of 8% to this total: \[ \text{Profit} = 36,000 \times 0.08 = 2,880. \] Finally, to find the total bid amount, you add the profit to the total before profit: \[ \text{Total bid amount} = 36,000 + 2,880 = 38,880.