Multi-Storey Builders Ltd Had a Large Three-Year Project with Total

question 7

Multiple Choice

Multi-Storey Builders Ltd had a large three-year project with total revenue of $8 000 000 and estimated total costs of $6 500 000. The project was 20 per cent complete at the end of the first year, 70 per cent complete at the end of the second year and 100 per cent complete at the end of the third year. Revenues and costs were as estimated. How much profit was earned during the second year if the percentage of completion method was used?

• A) $300 000
• B) $750 000
• C) $1 050 000
• D) None of the above

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Definitions:

Return on Investment

A financial ratio that calculates the gain or loss generated on an investment relative to the amount of money invested, expressed as a percentage.

Invested Assets

Resources or capital that have been allocated to investments such as stocks, bonds, real estate, or other vehicles with the expectation of earning a return.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding direct production costs (also known as overheads).

Negotiated Price Approach

A pricing strategy where the final sale price of a product or service is determined through bargaining between the buyer and the seller.