In a Unit Price contract, the total payment is determined by what calculation?

In a Unit Price contract, the total payment is determined by what calculation?

• A. Unit price plus overhead
• B. The maximum guaranteed price
• C. The number of units times the unit price
• D. A fixed sum

Answer: (C)

In a unit price contract, payment is based on actual quantities measured multiplied by their agreed unit prices. The total is the sum of each quantity times its unit price. This means for every line item, you take how much work was done (the quantity) and multiply it by the price per unit, then add those amounts together. For example, if you place 100 units at $10 per unit and 50 units at $20 per unit, the total would be 100×10 plus 50×20, giving the final payment. This method is used when quantities are uncertain at the outset, so you pay for what is actually completed rather than a single fixed amount. Other contract forms like a fixed total or a guaranteed maximum price are not how unit price contracts determine payment, and simply adding overhead to a unit price isn’t the prescribed calculation—the payment hinges on actual quantities times unit prices.

In a unit price contract, payment is based on actual quantities measured multiplied by their agreed unit prices. The total is the sum of each quantity times its unit price. This means for every line item, you take how much work was done (the quantity) and multiply it by the price per unit, then add those amounts together. For example, if you place 100 units at $10 per unit and 50 units at $20 per unit, the total would be 100×10 plus 50×20, giving the final payment. This method is used when quantities are uncertain at the outset, so you pay for what is actually completed rather than a single fixed amount. Other contract forms like a fixed total or a guaranteed maximum price are not how unit price contracts determine payment, and simply adding overhead to a unit price isn’t the prescribed calculation—the payment hinges on actual quantities times unit prices.