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5 June, 20:49

1. A contract calls for a total payment of $800,000 with a guarantee. Essentially the contractor is guaranteed to make at least $200,000 above his costs. If the contractor can demonstrate his costs exceed $600,000, the project will pay the difference, with a $50,000 ceiling on the overage. The contractor demonstrates he spent $623,000. How much (gross) must the project remit to the contractor?

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  1. 5 June, 21:30
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    The gross which the project has to remit to the contractor is $823,000

    Explanation:

    There are two things that must be fulfilled for the project to remit to the contractor is the amount.

    1) First is the guaranteed payment of $800,000.

    2) Second, the contractor's expense is more than $600,000, with a payment cap of up to $ 50,000.

    The contractor has demonstrated that the cost incurred is $623,000 which is $23,000 above the limit of $600,000.

    As this gap is still below $50,000, this will be handed over to the contractor by the client.

    The gross which the project has to remit to the contractor = $800,000 + $23,000 = $823,000
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