Tullis Construction Enters into a Long-Term Fixed Price Contract to Build

question 91

Multiple Choice

Tullis Construction enters into a long-term fixed price contract to build an office tower for $15,000,000. In the first year of the contract. Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $3,700,000 in year 1 and collected $3,100,000 by the end of the end of the year. Refer to Tullis Construction. How much gross profit should Tullis recognize in Year 1 assuming the use of the percentage-of-completion method? (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

• A) $0
• B) $2,625,000
• C) $8,300,000
• D) $600,000

---

Definitions:

Rational Model

A decision-making approach based on logical and systematic analysis of information and alternatives to achieve the most reasonable outcome.

Optimize

The act of making something as effective, perfect, or useful as possible, often involving the allocation of resources in the most efficient way.

Satisfice

Satisfice is a decision-making strategy that involves choosing an option that meets the minimum requirements necessary for satisfaction, rather than optimizing for the best possible outcome.

Escalation of Commitment

A phenomenon where people increase their investment in a decision despite new evidence suggesting it may be wrong, often due to cognitive biases or emotional attachment.