PJM question #9
An architect planned 1,000 hours for the design development (DD) phase of a project with an average billing rate of $50 per hour. The project has a planned multiplier of 3.05 and a total DD phase compensation of $152,500. At the end of DD, the architect finds that an excess of 240 labor hours were needed for DD.
What is the additional project cost?
Correct $36,000
My answer: $12,000
I passed PCM already and believe that the "billing rate" is the definition of what has been billed to the client, so no need to use the multiplier. (I had a feeling thou that $50 per hour was too low..)
Anyway, can someone clarify? Thanks :)
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The correct answer is $36,600.
$50 x 3.05 (Direct Salary Expense Multiplier or DSE, which is Direct Salary + Indirect Salary + Profit / Direct Salary, is the amount the firm has to charge to pay staff, overhead and make a profit).
In the question, the firm budgeted for DD at 1000 hours or $152,500. That is $50 x 3.05 DSE x 1000 hours.
Since the firm went over 240 hours and apparently charge the client for that... the solution is 240 hours x DSE or $36,600.
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I totally agree with Nathalie. The question has said "billing rate" not just "the rate" and the billing rate is what we charge the client and has already multiplied by the multiplier. Although low, $50 is what the question says they charge the client. It shouldn't be multiplied again for the profit and overhead.
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If $152,500 is for 1000 hrs, so each billing hour is $152.50 and divided by the Net Multiplier (3.05) = $50 (hourly rate)
Additional 240 hrs x $152.50 = $36,600.
Yes, I know it was a tricky question, but you'll get the answer if you check the maths. I passed the PcM, too, and I learned that maths is the best way to resolve it beyond the words in this type of question.
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Nathalie,
I think you are correct. I happened to get this one right on the practice exam. I wasn't sure if it meant billing rate or the payment received by the employee, so I did some math to check.
50 x 1000 hours = $50,000 total DD phase fee. The question clearly states it's $152,500 total DD phase fee
But,
50 x 3.05 = 152.5
152.5 x 1000 hours = $152,500
So now things line up.
The language is tricky, but the math doesn't lie. It's pretty annoying, but to pass the exams I find that we need to read the questions like lawyers reviewing a contract and call out the slightest discrepancy. Be ready for anything!
P.S. I know I'm pretty late to this discussion, but I hope you passed!
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Hi All,
So this question has been updated on the practice exam to read "the rate" rather than "billing rate", so that aspect of the question is no longer as confusing. However, it still seems like a pretty big leap to me to assume that the architect is collecting an hourly fee for this project and billing the client for any overages from their initial projection. If this were a fixed fee or percentage of construction cost then the architect would have to eat the additional 240 hours at the direct cost of $50/hr ($12,000).
What I have learned from this and other NCARB practice exam questions is that you really need to take these questions at face value and not overthink it. This also goes for questions that mention something as being a high priority for the owner (minimize "x", maximize "y", or "primary consideration"). You need to stick to exactly what the question is asking and only look at it through that lens, even if it sometimes goes against your better judgement.
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