The Naples Company Uses the Percentage-Of-Completion Method and the Cost-To-Cost

question 40

Multiple Choice

The Naples Company uses the percentage-of-completion method and the cost-to-cost method for its long-term construction contracts.On one such contract, Naples expects total revenues of $260, 000 and total costs of $200, 000.During the first year, Naples incurred costs of $50, 000 and billed the customer $30, 000 under the contract.At what net amount should Naples' Construction in Progress for this contract be reported at the end of the first year?

• A)$30, 000
• B)$35, 000
• C)$50, 000
• D)$65, 000

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Definitions:

Allocative Efficiency

A state of the economy in which production represents consumer preferences; every good or service is produced up to the point where the last unit provides a benefit to consumers equal to the cost of producing it.

Producer Surplus

The variance between the price producers are willing to take for a good or service and the price they end up receiving.

Consumer Surplus

The discrepancy between the price consumers are ready to offer for a good or service and the price they end up paying.

Marginal Benefit

The enhanced enjoyment or utility gained from the consumption of one extra unit of a good or service.