On 1 January 2014, Peter Ltd Signed a Contract Worth

question 29

Multiple Choice

On 1 January 2014, Peter Ltd signed a contract worth $64 000 000 to construct the Cycling Stadium. The stadium was to be built over three years, with progress payments as follows:

Estimated costs were $50 000 000. The project was 35 per cent complete at the end of 2014, 75 per cent complete at the end of 2015 and 100 per cent complete at the end of 2016. Revenues and costs were as estimated. How much profit was earned during 2014 if the percentage of completion method was used?

• A) $3 281 250
• B) $4 200 000
• C) $4 900 000
• D) $5 600 000

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Definitions:

Prototype

An original model or preliminary version of a product from which other forms are developed or copied.

Availability Heuristic

A cognitive bias in which people judge the probability of events based on how easily examples come to mind, often leading to skewed perceptions of reality.

Base-Rate

The underlying or foundational rate of occurrence for a particular event or outcome within a given population or dataset.

Base-Rate Information

The frequency with which an event occurs within a general population.