In 2018, Cupid Construction Co. (CCC) began work on a two-year fixed price contract project. CCC recognizes revenue over time according to percentage of completion for this contract, and provides the following information (dollars in millions):
-What is the fixed contract price for CCC's project?
A) $120 million.
B) $225 million.
C) $345 million.
D) $349.5 million.

Question

In 2018, Cupid Construction Co. (CCC) began work on a two-year fixed price contract project. CCC recognizes revenue over time according to percentage of completion for this contract, and provides the following information (dollars in millions):  
-What is the fixed contract price for CCC's project?
A) $120 million. 
B) $225 million. 
C) $345 million. 
D) $349.5 million.

Quizplus · Accepted Answer

Gross profit recognized in 2018 of $72 million = 60% of estimated gross project on the project. Therefore, total gross profit is estimated at $72 million/.6 = $120 million. Since Gross profit = Contract price - Estimated total construction costs of $225 million, the Contract price = $120 million + $225 million = $345 million. Alternatively, construction in progress = cost to date + profit recognized to date = $207 million (given) = 60% of total project price. $207 million/.6 = $345 million contract price.