Lake Construction Company has consistently used the percentage-of-completion method of recognizing income. During year 1, Lake entered into a fixed-price contract to construct an office building for $10,000,000. Information relating to the contract is as follows:

At December 31
Year 1 (Year 2)
Percentage of completion 20% (60%)
Estimated total cost at completion $7,500,000 $8,000,000)
Income recognized (cumulative) 500,000 (1,200,000)

Contract costs incurred during year 2 were

a) $3,200,000
b) $3,300,000
c) $3,500,000
d) $4,800,000