NCARB Practice test Q#7
An architecture firm is awarded a project for an addition to an elementary school. Project details follow:
- Negotiated fee percentage: 5%
- Construction budget: $5,000,000
- Gross fee profit: 10%
- Consultant expenses: 35%
The firm now wants to manage the available architectural fee with the hours required to complete the project.
What is the value of the fee the architect should use in planning these hours?
| A. | $137,500 |
| B. | $146,250 |
| C. | $162,500 |
| D. | $187,500 |
CORRECT RESPONSE
$137,500
CALCULATIONS
1. $5,000,000 (construction budget) x 0.05 (negotiated fee percentage) = $250,000 (negotiated fee)
2. 0.35 (consultant expenses percentage) x $250,000 (negotiated fee) = $87,500 (consultant expenses)
3. $250,000 (negotiated fee) - $87,500 (consultant expenses) = $162,500
4. 0.10 (gross fee profit percentage) x $250,000 (negotiated fee) = $25,000 (target profit)
5. $162,500 - $25,000 = $137,500 (available architectural fee)
I don't understand the Architecture fee deducted from the profit % here. I included and added the profit% for the Architecture fee.. this question is very unclear, they don't give any information about the Contractor and only the contractor and Architects used to add a %of the profit fee for their services, we never had any case if the consultant take %profit fee they might count for that but it should be included in consultant fee.. I am just not sure who gets
%Gross Fee profit in this question if not Architect. I believe we need to add on the % Profit fee for architects' fees.
Please NCARB can you explain this answer a bit more? why we deducted profit from Architect's fee instead of adding it on? thanks
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So, the Architecture Firm has to pay their staff, bills, rent etc. The majority of the money the firm makes goes to the direct and indirect salaries. The question states that 5% of the gross fee is the firm's profit, the rest of the money that is earned from the job goes to bills and that is what they were asking.
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It's simplest to think of this question with the following equation:
Project Budget (billable time) = Gross Fee - Consultants' Fee - Target Profit %
If you were to add profit in this equation, you'd not only be eliminating your firm's profit percentage, but also allocating more labor hours to the project than you're being compensated for overall.
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