Question

A contractor bids $49,160 on a project, based on the estimate below. On completion, the project analysis showed variances from the estimate as shown. What was the net profit? A. 4,030; 8.20% B. 4,835; 9.84% C. 6,372; 12.96$ D. 8,835; 17.97%

Answer 1

The net profit is $4,835.

Step-by-step explanation:

Typically, we would also consider both explicit and implicit costs. For instance, if a contractor had total revenues of $200,000 and explicit costs of $85,000, and implicit costs of $125,000, the economic profit would be a negative figure, indicating a loss.

To calculate the net profit, we need to consider both the estimate and the variances from the estimate. Based on the information given, we can find the net profit by subtracting the total estimate from the actual project analysis:

Net Profit = Estimate - Variances

Net Profit = $49,160 - ($4,030 + 8.20% of $49,160)

After calculating the above expression, we find that the net profit is $4,835, which is option B.

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