Question 1

If the nominal interest rate is 8.2% and the rate of inflation is 6.6%, what is the approximate real interest rate?&#10;A)1.6%&#10;B)7.4%&#10;C)14.8%&#10;D)None of the above

Accepted Answer

If the nominal interest rate is 8.2% and the rate of inflation is 6.6%, the approximate real interest rate is 1.6%. The real interest rate is approximately equal to the nominal interest rate minus the rate of inflation. The rate of inflation can be obtained from the U.S. Bureau of Labor Statistics.

Question 2

What is the estimated labor budget for a 40-week project with the following staffing?
Personnel - Hourly Billing Rate - Hours per Week
Principal --- $185 --- 2
Resident Engineer --- $125 --- 32
Inspector --- $80 --- 40
Administrative Assistant --- $45 --- 10

A)$17,400
B)$151,700
C)$320,800
D)$696,000

$320,800

Accepted Answer

The labor budget for the 40-week project is $320,800.
Solution: Labor budget is equal to the sum of the cost for each staff member
Labor budget= (Staff Member Hourly Rate x Hours per week x # of weeks)
Principal: ($185/hour) (2 hours/week) (40 weeks) = $ 14,800
Resident Engineer: ($125/hour) (32 hours/week) (40 weeks) = $ 160,000
Inspector : ($80/hour) (40 hours/week) (40 weeks) = $ 128,000
Admin: ($45/hour) (10 hours/week) (40 weeks) = $ 18,000
Total labor budget = $14,800 + 160,000 + 128,000 + 18,000 = $320,800

Question 3

What is the calculated overhead rate for an engineering firm that provides inspection and testing services given the following year-end audit information?
Item: Cost ($)
Direct Labor: 922,000
Allowable fringe benefits:452,000
Allowable general overhead: 1,200,000

A)38%
B)156%
C)179%
D)469%

179%

Accepted Answer

The calculated overhead rate for the engineering firm that provides inspection and testing services is 179%.
Solution: Use the overhead rate formula
Overhead rate = (fringe benefit + general overhead)/ direct labor
Overhead rate = ($452,000 + $1,200,000)/ $922,000
= 1.79 x 100 = 179%

Question 4

ITE, LLC charges $125/hour for a Resident Engineer (RE) and $75/hour for an Inspector (I). Administrative staff hours are estimated to be 25% of RE and I time and are charged at $45 per hour.
A profit rate of 10% is charged on total labor. If a project is estimated to take 10 weeks, and assuming a 40-hour work week for both the RE and I, what is the estimated marked-up labor cost?

A)$89,000
B)$97,900
C)107,800
D)None of the above

Accepted Answer

If a project is estimated to take 10 weeks for the given staff, the estimated marked-up labor cost is $97,900.
To arrive at this solution, first calculate cost of labor:
RE labor cost: $125/hour x 10 week x 40 hour/week = $50,000
I labor cost: $75/hour x 10 weeks x 40 hour/week = $30,000 
Administrative hours: = (25%) (RE time + I time) = (0.25) (2 x 40 hours/week x 10 weeks) = 200 hours
Administrative labor cost: $45/hour x 200 hours = $9,000
Total labor cost = $50,000 + $30,000 + $9,000 = $89,000
Then, add profit to labor cost:
Profit rate = 10%
Marked-up labor cost = $89,000 x 1.10 = $ 97,900

Question 5

Which of the following best describes the construction cost estimating term stagflation?&#10;A)Slow economic growth, stable inflation and unemployment rates&#10;B)Slow economic growth, increased inflation rates, and relatively high unemployment&#10;C)A. and B.&#10;D)None of the above

Accepted Answer

Stagflation may best be described as a condition of slow economic growth, inflation, and relatively high unemployment. Stagflation happens when the economy is stagnated, but prices keep rising. Some believe that while the current economy is in stagflation, the economic situation of the 1970s was worse when the price of hydrocarbons rose dramatically and economic stagnation worsened the effects of inflation.

Question 6

What is the sample mean of the following cost data?
Supplier: Cost of Sonar Inspection Unit
CUES:$ 80,000
RedZone: $ 92,500
Olsen Equipment: $ 92,500
Envirosight: $ 100,200
Collins: $ 140,000

A)$80,832
B)$92,500
C)$101,040
D)None of the above

Accepted Answer

The sample mean of the cost data provided is $101,040. The sample mean is the "average" of the values provided. The mean is calculated by summing the costs and dividing the total sum by the number of costs (n).
Solution: mean = ($80,000 + 92,500 + 92,500 + 100,200 + 140,000)/5
= $101,040

Question 7

What is the sample median of the following cost data?
Supplier: Cost of Sonar Inspection Unit
CUES:$ 80,000
RedZone: $ 92,500
Olsen Equipment: $ 92,500
Envirosight: $ 100,200
Collins: $ 140,000

A)$80,832
B)$92,500
C)$101,040
D)None of the above

Accepted Answer

The sample median of the cost data provided is $92,500. The sample median is the "middle" value of the costs provided. The median can be determined by listing the values in numerical order and identifying the value that is in the middle of the list. If there is an even number of values in the list, the median value is the calculated average of the two middle values.
Solution: median = middle value
Supplier: Cost of Sonar Inspection Unit
CUES:$ 80,000
RedZone: $ 92,500
Olsen Equipment: $ 92,500
Envirosight: $ 100,200
Collins: $ 140,000

Question 8

Which of the following is not generally considered a component of construction cost estimate preparation?&#10;A)Preparing planning documents, conceptual drawings, detailed plans, and specifications&#10;B)Interpret technical information and develop estimates of quantities&#10;C)Relate construction specifications and plans to specific site conditions&#10;D)Apply unit price costing that reflects site and current market conditions

Accepted Answer

Preparing planning documents, conceptual drawings, detailed plans, and specifications is not generally considered to be a component of preparing a construction cost estimate. The technical information provided by the documents, drawings, plans, and specifications prepared by planners and/or design personnel are interpreted by cost estimators in order to conceptualize a work component for which a cost must be estimated. In that sense, cost estimating is more of an art than a science.

Question 9

In which phase of a typical capital improvement project, such as building a highway or a flood control dam, is cost estimating undertaken?&#10;A)Planning phase&#10;B)Design phase&#10;C)Bidding phase&#10;D)All of the above

Accepted Answer

In a typical capital improvement project, such as building a highway or a flood control dam, cost estimating is performed during the planning, design, and bidding phases. Planning phase estimates are used for capital improvement planning purposes, long range funding forecasts, and budgeting purposes. During the design phase, cost estimates are used to balance design elements to manage costs. Engineers estimate construction costs for bidding purposes, and contractors use cost estimates to prepare bids. The estimates are then often used for obligating funds and as the basis of cost for the contractor.

Question 10

Which of the following statements correctly describes a construction cost estimate?&#10;A)Approximation of the probable quantity and unit cost of each element in a project&#10;B)Includes a factor to account for uncertainty and risk associated with project elements and project environment&#10;C)Aggregation of many elements; not a single number&#10;D)All of the above

Accepted Answer

All of the statements listed correctly describe a construction cost estimate. A construction cost estimate is developed by interpreting construction plans and specifications to determine quantities, and identifying associated costs from related materials and similar past projects. Because economic climates change over time and site conditions may be unpredictable, uncertainty and risks come into play. Costs from previous projects must be adjusted, and future costs projected.

Question 11

Which of the following may be considered as an Unforeseen Condition?&#10;A)Contaminated soils&#10;B)Unearthed historic artifact&#10;C)Incorrectly drawn underground utilities&#10;D)All of the above

Accepted Answer

The answer of Which of the following may be considered...

Question 12

Which of the following cost estimating techniques is commonly used to develop planning level cost estimates?&#10;A)Analogous&#10;B)Bid-Based&#10;C)Parametric&#10;D)Cost-Based

Accepted Answer

The answer of Which of the following cost estimating techniques...

Question 13

Which of the following estimating techniques rely on a bottom-up approach to estimate construction costs?&#10;A)Cost-based&#10;B)Bid-based&#10;C)Historical percentages&#10;D)Analogous

Accepted Answer

The answer of Which of the following estimating techniques rely...

Question 14

The Engineering News-Record (ENR) provides what is considered to be reliable general construction cost index (CCI) and building cost index (BCI) historic values. Which of the following statements best describes the use of ENR indexes?

A)Use CCI when labor costs are a significant portion of total cost
B)Use BCI costs for developing estimates of structures
C)A. and B.
D)None of the above

Accepted Answer

The answer of The Engineering News-Record (ENR) provides what is...

Deck 4: Estimation