Exhibit 18-2 the Following Information Relates to a Project of the Sarasota

question 24

Multiple Choice

Exhibit 18-2 The following information relates to a project of the Sarasota Construction Company:
$\begin{array}{llll}&2010&2011&2012\\\text { Construction costs incurred } & \$ 136,000 & \$ 546,500 & \$ 200,000 \\\text { Estimated costs to complete } & 714,000 & 227,500 & --\end{array}$
The contract price was $1, 000, 000.Sarasota used the percentage-of-completion method of revenue recognition.
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Refer to Exhibit 18-2.What amount of gross profit was recognized in 2010?

• A)$150, 000
• B)$ 28, 571
• C)$ 24, 000
• D)$ 20, 400

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Definitions:

Incremental Income

The additional income that is generated as a result of a specific business decision or activity.

Incremental Costs

Additional costs associated with producing one extra unit of a product or delivering an additional service.

Direct Materials

Raw materials that are directly used in the manufacturing of a product and can be easily traced to the finished product.

Direct Labor

The cost of labor that can directly be associated with the production of goods or services.