Plucky Company recently entered into a contract in which Plucky charges a price of actual cost plus 20%. If the price charged based on this formula is less than the target price of $4,500,000, Plucky is entitled to also receive 50% of the difference between the actual cost and the cost that would lead to the formula price equalling the target price. Plucky incurred an actual cost of $3,600,000. How much will Plucky make from the contract? a) $4,320,000 b) $4,395,000 c) $4,410,000 d) $4,500,000
Plucky Company recently entered into a contract in which Plucky charges a price of actual cost plus 20%. If the price charged based on this formula is less than the target price of $4,500,000, Plucky is entitled to also receive 50% of the difference between the actual cost and the cost that would lead to the formula price equalling the target price. Plucky incurred an actual cost of $3,600,000. How much will Plucky make from the contract? a) $4,320,000 b) $4,395,000 c) $4,410,000 d) $4,500,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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13. Plucky Company recently entered into a contract in which Plucky charges a price of actual cost plus 20%. If the price charged based on this formula is less than the target price of $4,500,000, Plucky is entitled to also receive 50% of the difference between the actual cost and the cost that would lead to the formula price equalling the target price. Plucky incurred an actual cost of $3,600,000. How much will Plucky make from the contract?
a) $4,320,000
b) $4,395,000
c) $4,410,000
d) $4,500,000
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