Under a cost-plus contract with a 20% markup on direct costs, what would be the base amount due for direct costs of $60,000 before bonuses?

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Prepare for the Virginia Class A Contractor License Exam. Review with flashcards and multiple choice questions. Utilize hints and explanations to master the exam material, ensuring you're ready to succeed!

Multiple Choice

Under a cost-plus contract with a 20% markup on direct costs, what would be the base amount due for direct costs of $60,000 before bonuses?

Explanation:
In a cost-plus contract, you pay the actual direct costs plus a markup on those costs. Here, the direct costs are 60,000 and the markup is 20% of that amount. 20% of 60,000 is 12,000. Adding that to the direct costs gives 60,000 + 12,000 = 72,000. This is the base amount due before any bonuses. (Bonuses, if any, would be separate.)

In a cost-plus contract, you pay the actual direct costs plus a markup on those costs. Here, the direct costs are 60,000 and the markup is 20% of that amount. 20% of 60,000 is 12,000. Adding that to the direct costs gives 60,000 + 12,000 = 72,000. This is the base amount due before any bonuses. (Bonuses, if any, would be separate.)

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