ARE Live: Math Mock Exam

ARE Live
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Hi @gscott !

The 10% contingency was for the total of completed work and stored items. Since we were given a sum for both of the items ($610,308.36) on line item 4, we would just take 10% of that number. Thanks for your comment and for attending today’s ARE Live!

-Rebecca

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Hi @sflores !

Thanks for your question! Because we’re told it’s a 10% contingency for both stored materials and completed work and we’re given a lump sum for that on line item 4 ($610,308.36), we just take 10% of that number. Thanks for attending today’s ARE Live!

-Rebecca

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Hi @cashaw20 !

Awesome question! This could have been calculated either way. You could have applied the net multiplier to each individual or to the whole team and had the same result. Hope that helps, thanks for attending today’s ARE Live!

-Rebecca

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Awesome question! The break even ratio is the overhead rate plus the unit cost of 1.00 for an hour of salary. The AHPP gives a great example of this on page 410: Overhead rate of 1.3 + 1.0 = break even rate of 2.3. This means for every $1.00 of salary the firm must recapture $2.30 just to break even.

And for the question of the net multiplier, no we don’t need to use that number to get the time period. We have the total lump sum being charged to the client, the billing rate of each team member, and the percentage of time allotted to each phase which are the only numbers needed to calculate the amount of time. The net multiplier is the ratio of net operating revenue to total direct labor, which is not pertinent to what we’re calculating in this question. Thanks for attending today’s ARE Live and for your questions!

-Rebecca

67

Hi @ASaynyarack !

Thanks for your question! This chart gives us the indirect labor total and the total labor to first find the direct labor. Total labor - indirect labor = direct labor ($500,000). It also gives us the net profit which we use to find the net revenue. Net profit = net revenue - (total indirect expenses + direct salary) (Net revenue = $1,551,000) To then find the net multiplier we’ll use net multiplier = net revenue/direct labor (Net multiplier = 3.1)

Let me know if this makes sense! We’re essentially just using the information given to find the number needed to get to the net multiplier which is what the question is asking of us. Thanks!

-Rebecca