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

question 103

Multiple Choice

Camey Construction enters into a long-term fixed price contract to build an office building for $5,000,000. In the first year of the contract Camey incurs $1,400,000 of cost and the engineers determined that the remaining costs to complete the project are $2,500,000. Camey billed $4,000,000 and collected $1,000,000 in year 1. Refer to Camey Construction. How much gross profit should Camey recognize in Year 1 assuming the use of the percentage of completion method? (Round any intermediary percentages to the nearest hundredth percent, and round your final answer to the nearest whole dollar.)

• A) $394,900
• B) $2,600,000
• C) $525,000
• D) $1,400,000

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Definitions:

Marginal Product

The additional output produced as a result of using one more unit of a particular input, holding all other inputs constant.

Capital/Labor Ratio

The capital/labor ratio is a measure used in economics to indicate the amount of capital relative to the quantity of labor used in the production process.

Labor Productivity

The measure of the economic output produced per unit of labor input.

U.S.

A country consisting of 50 states, a federal district, and various territories, known formally as the United States of America.