# PCM Practice Exam Question (from Form3)

**URL:** <https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428>\
**Category:** Practice Management\
**Created:** [January 25, 2021, 6:46pm UTC](https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428 "2021-01-25T18:46:37Z")\
**Posts on this page:** 6\
**Page:** 1

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**Author:** ![danielaiulia](https://blackspectacles.com/uploads/images/5.png) [@danielaiulia](https://community.blackspectacles.com/u/danielaiulia)\
**Post date:** [January 25, 2021, 6:46pm UTC](https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428/1 "2021-01-25T18:46:37Z")

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The architectural firm has calculated the following financial projections:  
Annual hours for 8 billable employees = 16,000 hours  
Annual payroll = $715,000  
Annual overhead = $380,000  
Firm is targeting 20% profit.  
What is the hourly billing rate? Round answer up to the nearest whole dollar amount.

Is the correct answer $83/hour or $86/hour?

Option 1:  
Step 1: Calculate hourly payroll billing rate: $715,000 / 16,000 hours = $44.69/hour  
Step 2: Calculate hourly overhead billing rate: 380,000 / 16,000 hours = 23.75/hour  
Step 3: Calculate total hourly billing rate: $44.69 + $23.75 = 68.44/hour Step 4: Calculate hourly profit billing rate: 68.44 X .20 = 13.69/hour Step 5: Calculate total billing rate with profit: 68.44 + $13.69 = 82.13/hour Round up to 83/hour.

Option2:  
Step 1: Calculate hourly payroll billing rate: $715,000 / 16,000 hours = $44.69/hour  
Step 2: Calculate hourly overhead billing rate: 380,000 / 16,000 hours = 23.75/hour  
Step 3: Calculate total hourly billing rate: $44.69 + $23.75 = $68.44/hour  
Step 4: Calculate total billing rate with profit: $68.44 : o.8=85.55  
Round up to $86/hour

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**Author:** ![monicafitzpatrick](https://blackspectacles.com/uploads/images/1.png) [@monicafitzpatrick](https://community.blackspectacles.com/u/monicafitzpatrick)\
**Post date:** [January 26, 2021, 7:56pm UTC](https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428/2 "2021-01-26T19:56:40Z")

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Hi @danielaiulia and welcome to the ARE Community! @coachlizschneider do you mind jumping in?

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**Author:** ![coachlizschneider](https://blackspectacles.com/uploads/images/19.png) [@coachlizschneider](https://community.blackspectacles.com/u/coachlizschneider)\
**Post date:** [January 27, 2021, 4:58am UTC](https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428/3 "2021-01-27T04:58:22Z")

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@danielaiulia Thanks for the question! Option 1 is the calculation you should follow. Multiplying by .2 will give you 20% of the $68.44. When you divide by .8 it’s the equivalent of multiplying by 1.25 which would be 125% instead of 120% which is what you are looking for. You could also multiply by 1.20 instead of .20 and skip step 5.

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**Author:** ![danielaiulia](https://blackspectacles.com/uploads/images/5.png) [@danielaiulia](https://community.blackspectacles.com/u/danielaiulia)\
**Post date:** [January 27, 2021, 5:03am UTC](https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428/4 "2021-01-27T05:03:05Z")

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Thank you for clarifying

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**Author:** ![ms2023](https://blackspectacles.com/uploads/images/10.png) [@ms2023](https://community.blackspectacles.com/u/ms2023)\
**Post date:** [December 20, 2023, 3:58am UTC](https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428/5 "2023-12-20T03:58:46Z")

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On the PCM Section 2 quiz, it states $86 is the correct answer. Is this a mistake?  
I got $83 as per option 1.  
Also, from my understanding of this question, the Billing Rate should include the overhead, profit, and the hourly rate. Is it correct to look at it as:  
Billing Rate = hourly rate + overhead + profit

Thank you

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**Author:** ![jmochelle](https://yyz1.discourse-cdn.com/flex029/user_avatar/community.blackspectacles.com/jmochelle/32/1890_2.png) [@jmochelle](https://community.blackspectacles.com/u/jmochelle)\
**Post date:** [December 12, 2025, 9:12pm UTC](https://community.blackspectacles.com/t/pcm-practice-exam-question-from-form3/2428/6 "2025-12-12T21:12:22Z")

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I am not sure about this.  
Divide the final answers into the original BER HR and $86 gets you closer to 20%.  
$68.44 / $83 = 0.824 = 82% = inv% profit is %18  
$68.44 / $86 = 0.795 = 80% = inv% profit is %20

Any one care to clarify or comment? Please?