PJM Section 1 Quiz, #2

Please see the attached question from Section 1 Quiz.
Can you please identify why the percentages are not of $138,000?

I did the problem like this:
$2,300,000 x 6% = $138,000
40% + 5% + 5% = 50%
100%-50% = 50%
50% of $138,000 = $69,000

If you take 40% of $138,000 = $82,800 and then 10% of the $82,800 = $74,520.
Why are the percentages not added together and of the original project gross fee?

Thank you in advanced for your help.

Hi @amelia.tayeh !

Thanks so much for your question! Both the contingency and the non-reimbursable expenses are based on the architect’s net service revenue. This is why we have to take out the 40% first for the consultant’s fees to get the net service revenue, and then take out 10% of the net service revenue to get to the labor costs. The consultants will include their own contingency and have their own non-reimbursable expenses separate from the architect that will be taken from their own net service revenue. I hope this helps! Thank you!