The budget for a new renovation project is based on a scope of work outlined by the architect. The budget is $1,450,000. The project is delayed for 4 years, and the budget must be updated. A factor of inflation of 4.17% per year, beginning in year two, shall be added to determine the current budget amount.
To what amount will the budget increase to compensate for inflation? Round your answer to nearest whole dollar.
My answer: 189,064
Blackspectacles answer: 1,639,064
The question asked “what amount will the budget increase” not the new budget. Shouldn’t the answer be the difference if the question asks for the increased amount?
The architect for a new movie theater building will be coordinating the submission of construction documents to the authority having jurisdiction (AHJ). For this project, the local building department is the AHJ responsible for review and approval of the documents for construction.
Which document’s issuance usually signifies the end of the AHJ’s involvement in the building review and approval process?
My answer: Building Permit
Blackspectacles answer: Certificate of Occupancy
I am confused by this. If this is for CDs, I thought that will be for the building permit. How can a certificate of occupancy be issued if the construction has not started? I know that a TCO can be issued before the completion of the Work but based on this question we are in CDs and I assume the Work has not started. The delivery method was not stated in the question.
I could have misunderstood the questions so please let me know.
Hi @gloriaw92 ,
Thanks for posting!
On the first question regarding the budget increase - @coachchrishopstock can you please take a look into this? I calced it out and got $189,064 for the budget increase as well.
On the second question regarding the end of the AHJ’s involvement:
This is a tricky question! I think the key word in it is “involvement in building review and approval”. While the permit is issued appon the AHJ’s approval of the plans, they are still involved in building review & approval up until the the C of O. The AHJ will perform inspections as necessary and be involved up until substantial completion, when the building can be used for it’s intended use and the C of O is issued. At that time, the building has passed it’s final inspection and approval by the AHJ. @coachchrishopstock please let us know if you have anything to add on this question.
Hope this helps!
Continuing the discussion from PJM Practice Quiz 4 confusion:
@gloriaw92 I got the same answer initially as well but then after researching about how you calculate inflation, I did get the right answer. Basically every year we have to use the newly calculated budget number instead of the original budget number, here are the steps
A - Starting Cost,
B - Ending Cost
% - Inflation Rate
Starting Cost + Inflation Rate x Starting Cost = Ending Cost
A + (% x A) = B
1st year = 1,450, 000
2nd year = 1,450, 000 + (4.17%) 1,450,000 = 1,510,465
3rd year = 1,510,465 + (4.17%) 1,510,465 = 1,573,451.39
4th year = 1,573,451.39 + (4.17%) 1,573,451.39 = 1,639,064.31
round upto the nearest whole number = 1,639,064
I hope this helps
Glad to see a nice discussion about this!
The wording of this question is tricky but, in my opinion, in line with what you may expect to see on the ARE.
The question specifically asks TO what amount the budget will increase - another way of saying that, in statement form, is “the budget amount will increase TO ____”. You’d say that the budget increased from $1,450,000 to $1,639,064 - if we were only talking about the amount of increase, the question would ask something like “By how much did the budget increase?”
I hope this was helpful and a reminder to reread the question a couple of times to make sure you’re answering with the correct figure!