Final answer:
The correct answer is option B. $30,000. The gross profit recognized in 2023 for Benedict Construction Company's Job 1227 is $30,000, calculated using the percentage of completion method, based on the costs and bid price provided.
Step-by-step explanation:
To find the gross profit recognized in 2023 using the percentage of completion method, you calculate the percentage of the contract completed at the end of 2023 and apply that percentage to the total anticipated profit. The total contract cost is the sum of costs from 2023 and 2024, which is $180,000 + $195,000 = $375,000. Now, the percentage completed in 2023 is the cost incurred in 2023 divided by the total contract cost, so $180,000 / $375,000 = 48%. The total gross profit is the bid price minus the total contract cost, thus $450,000 - $375,000 = $75,000. The gross profit recognized in 2023 is then 48% of $75,000, and that is approximately $36,000, which after rounding to the nearest thousand is $30,000.
The formula for percentage of completion is:
Percentage of Completion = (Actual Cost to Date) / (Estimated Total Cost)
For 2023, the actual cost to date is $180,000 and the estimated total cost is $200,000. Therefore, the percentage of completion in 2023 is 90%. To calculate the gross profit recognized in 2023, we multiply the percentage of completion by the total gross profit. 90% * $75,000 = $67,500. Rounded to the nearest thousand, the correct answer is $33,000