The contract price is $8,750,000
What is contract price?
Contract price means the amount Lao Construction Company charged the customer for total contract's execution.
We need to ascertain the percentage completion of the project first and foremost, which is the total costs incurred to date divided by the contract's total costs.
cost incurred to date=$ 1,500,000
total contract's cost=cost incurred to date+ expected future costs
total contract's cost=$1,500,000+$6,000,000
total contract's cost=$7,500,000
% completion=$1,500,000/$7,500,000
% completion=20%
gross profit recognized=(contract price*% completion)-costs incurred till date
gross profit recognized=$250,000
contract price=unknown(assume it is X)
% completion=20%
cost incurred to date=$ 1,500,000
$250,000=(20%*X)-$1,500,000
$250,000+$1,500,000=0.20X
$1,750,000=0.20X
X=$1,750,000/0.20
X=$8,750,000
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