Kaplan CH 13 "Budget Analysis and Cost Estimating"

Question 1

An owner has established a fixed construction budget for a project. If the lowest project cost estimate exceeds the fixed budget, the architect should recommend that the owner do any of the following EXCEPT
A. decrease the size or quality of the project.
B. postpone construction until costs decline.
C. rebid the project using other contractors.
D. increase the construction budget.

Answer 1

B. postpone construction until costs decline. Cost, size, and quality are directly interrelated. Therefore, if the construction budget is fixed, the project must be reduced in size or quality. The owner may also rebid the project or decide to spend more money, but a hoped-for decline in prices seems unrealistic. See page 239.

Question 2

If you were the architect for the project
in the preceding question, your obligation
would be to
A. reduce the quality of construction so that the size and budget would remain unchanged.
B. reduce the size of the project so that the quality and budget would remain unchanged.
C. try to convince the owner to reduce the scope or increase the budget so the quality of the project would remain unchanged.
D. advise the owner of the situation and allow him or her to determine whether cost, size, or quality should be modified.

Answer 2

D. advise the owner of the situation and allow him or her to determine whether cost, size, or quality should be modified. It is not the function of the architect to reduce project cost, size, or quality; this is a prerogative of the owner.

Question 3

During excavation of a site, it is discovered that unanticipated adverse geological conditions will add at least l 0 percent to the total building cost. The architect should advise the owner to
A. stop work until additional funds are secured.
B. stop work and attempt to find an alternate site.
C. make a change in the cost, scope, or quality of the project.
D. reduce the project scope and quality in equal proportions

Answer 3

C. make a change in the cost, scope, or quality of the project.
After advising the owner of the additional costs and reviewing the possible changes that would bring the budget back into line, the architect must allow the owner to choose one or more of the three variables (cost, scope, quality) that must be modified.

Question 4

Construction costs are significantly influenced by which of the following? Check all that apply.
A. Project location
B. Rate of inflation
C. Skill of the estimator
D. Availability of labor
E. Availability of construction funds

Answer 4

D. Availability of labor

The estimator’s skill may affect the reliability of the cost estimate, but not the actual costs.

Question 5

An estimate indicates that an apartment project can be constructed for $80 per square foot at today’s construction costs. The cost index used for the estimate is at 850. To determine the actual cost, you project the index to reach 1,020, at which point the actual construction cost will be ____ per square feet.

Answer 5

$96.00 per square foot The present cost of $80 per square foot will increase in the ratio 1,020/850 = 1.20. Therefore, the actual construction cost will be 80 x 1.20 = $96 per square foot.

Question 6

In a preliminary project budget, off-site development costs would include
A. all access roads.
B. all accessory buildings.
C. fences placed on property lines.
D. utilities outside of property lines.

Answer 6

D. utilities outside of property lines.
Off-site costs include costs of improvements outside project property lines, such as utilities. Access road costs are paid for either by the owner or a government agency, depending on the situation.

Question 7

The contractor’s profit is computed by multiplying a fixed percentage by the
A. cost of construction.
B. cost of construction and professional fees.
C. total project development cost.
D. total project development budget.

Answer 7

A. cost of construction.

Question 8

Construction cost estimates prepared during the programming phase should be
A. based on appropriate unit costs.
B. based on a single lump-sum figure.
C. disregarded, because there are so many unknowns.
D. disregarded, because costs do not affect programmmg.

Answer 8

A. based on appropriate unit costs.

Question 9

Which of the following statements, regarding the tendencies of labor costs, are true?
I. Labor costs in rural areas tend to fluctuate more than in urban areas.
II. When construction activity is high and labor is scarce, wage rates tend to increase.
III. Wage demands tend to increase as interest rates rise.
IV. Wage demands tend to increase as unemployment rises.
A. I and IV C. I, II, and III
B. I and II D. II, III, and IV

Answer 9

I. Labor costs in rural areas tend to fluctuate more than in urban areas.
II. When construction activity is high and labor is scarce, wage rates tend to increase.
Increased wage demands are generally
a result of supply and demand, as well as
inflation. See page 255.

Question 10

Which of the following construction costs would a contractor be UNLIKELY to pay?
A. Topographic survey fee
B. Building permit fee
C. Workers' compensation insurance
D. Labor and material bond

Answer 10

A. Topographic survey fee
Topographic survey fees, as well as
fees for other professional services such