Utah Contractor Practice Exam

What must the bid be for a project with direct costs of $17,000, where project overhead is 20% of direct costs and a profit margin of 20% is desired?

1. $20,000

2. $20,400

3. $28,333

4. $29,368

The correct answer is: $28,333

To determine the correct bid for the project, you first need to calculate the overhead costs based on the direct costs provided and then add the desired profit margin. 1. **Calculate Overhead Costs**: Given that the direct costs are $17,000 and the overhead is 20% of those costs, you calculate the overhead as follows: \[ \text{Overhead} = 20\% \times 17,000 = 0.20 \times 17,000 = 3,400 \] 2. **Calculate Total Costs**: Next, you would add the direct costs and the overhead costs to get the total project costs: \[ \text{Total Costs} = \text{Direct Costs} + \text{Overhead} = 17,000 + 3,400 = 20,400 \] 3. **Calculate Desired Profit Margin**: Now that we have the total costs, you would calculate the profit margin, which is also 20% of the total costs: \[ \text{Profit} = 20\% \times 20,400 = 0.20 \times 20,400 = 4,080