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This​ year, Hamilton, a local manufacturer of​ off-shore drilling​ platforms, entered into a contract to construct a drilling platform that will be placed in the North Atlantic Ocean. The total contract price is​ $5,000,000, and Hamilton estimates the total construction cost at​ $3,000,000. Actual costs incurred this year are​ $600,000. If Hamilton uses the percentage of completion​ method, the gross profit for this year is:

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Answer:

$400,000

Explanation:

Percentage completed:

$600,000/$3,000,000 20%

Hence:

Revenue $5,000,000 x .20 = $1,000,000

Less Costs to date (600,000)

Gross profit$ 400,000

Therefore If Hamilton uses the percentage of completion​ method, the gross profit for this year is: $400,000

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