Question 1

Some cost manual services provide on-line computer access.

Accepted Answer

False

Question 2

The cost approach is often emphasized when estimating the value of new or nearly new property.

Accepted Answer

The cost approach is commonly used to estimate the value of new or nearly new property. This approach involves estimating the cost to replace the property, subtracting any depreciation, and adding the value of the land to arrive at an estimate of the property's value.

Question 3

Direct cost elements include labor, materials, and design costs.

Accepted Answer

Direct cost elements refer to costs that are directly attributed to the production of a product or service, and typically include labor costs, material costs, and design costs. Indirect cost elements, on the other hand, refer to costs that are not directly tied to production, such as rent, utilities, and office supplies.

Question 4

Indirect cost elements should not be included in cost estimates.

Accepted Answer

Indirect costs are an integral part of the cost estimate and cannot be ignored. They are expenses that cannot be directly attributed to a specific project, but are necessary for its successful completion, such as administrative costs, overhead expenses, and utilities. If indirect costs are not included, the cost estimate may not reflect the true costs of the project and may lead to unrealistic budgeting and potential project failure.

Question 5

Replacement cost and reproduction cost are the same.

Accepted Answer

Replacement cost is the cost of replacing an asset with a similar one at its current market value, while reproduction cost is the cost of recreating an asset exactly as it originally existed. They are not the same.

Question 6

Cost estimates are useful only in the cost approach to value.

Accepted Answer

Cost estimates can be used in other approaches to value, such as the income approach and the sales comparison approach. In the income approach, cost estimates may be used to estimate the cost of replacing improvements or to estimate the cost of deferred maintenance. In the sales comparison approach, cost estimates may be used to determine if a property is priced above or below its replacement cost.

Question 7

The quantity survey method is the most practical and widely used method of estimating construction costs.

Accepted Answer

The quantity survey method is detailed and accurate but not the most practical or widely used due to its complexity and time consumption. Other methods like unit cost estimating are more commonly used for practicality.

Question 8

The unit-in-place method of estimating costs is most often used as a supplement to refine the square-foot method.

Accepted Answer

The unit-in-place method is not typically used as a standalone method for estimating costs, but rather as a supplementary method to provide more specific cost estimates for individual components or systems within a building. It is commonly used in conjunction with the square-foot method to refine and enhance the accuracy of cost estimates.

Question 9

Increased floor area results in higher costs per square foot.

Accepted Answer

Increased floor area results in a decrease in costs per square foot due to economies of scale. As the area increases, fixed costs, such as foundation and roof, are spread over a larger area, resulting in lower costs per square foot.

Question 10

The cost estimates used in appraisals should reflect cost levels on the date of value, instead of actual or historic costs.

Accepted Answer

Cost estimates used in appraisals should reflect current cost levels on the date of value, rather than past or historical costs that may not accurately reflect current market conditions. This approach helps ensure that appraisals provide an accurate reflection of the current value of a property.

Deck 11: Introducing the Cost Approach