• Isn't dividing by the complement (inverse?) of 18% the same as multiplying by 18%?

Not certain if I am answering/understanding your question, but hopefully that helps!

• I think it depends on are you going to calculate the profit before or after taking the engineering fee out

• David has a very good point. AHPP page 440 has an example that clearly defines Net Operating Revenue (NOR) and Net Profit, and is much less confusing. Real ARE exam questions are more like the AHPP examples and will define clearly what the question is asking for.

Gang Chen, Author, Architect, LEED AP BD+C (GreenExamEducation.com)

• 1. Design fee = \$250,000 = 100%
2. Engineers = \$250,000 x .25 = \$62,500
3. Project labor budget = \$187,500
4. Billing rate including 18% profit: \$75.00 / 0.82 = \$91.46
5. \$187,500 / \$91.46 = 2,050
• Thanks, Valerie!

• David: I think it depends on are you going to calculate the profit before or after taking the engineering fee out - David, it really does not matter, the amount of hours that arch firm needs to allocate to complete this work remains the same based on billing rate of 75.00.

• (Edited )

I have a different opinion. Since the total fee is \$250,000, without very specific definition, most people would think the profit is 18% of the total fee, NOT 18% of only the arch portion.

1. Design fee = \$250,000 = 100%
2. Engineers = \$250,000 x .25 = \$62,500
3. 18% profit: \$250,000 x .18 = \$45,000
4. Project labor budget = \$187,500
5. \$250,000 - \$62,500 - \$45,000 = \$142,500
6. \$142,500 / \$75 = 1,900

Since every ARE question has been beta tested, I do NOT think any ARE question can be as confusing as it is worded in this question, otherwise, it would have been thrown out or completely modified to be less confusing.

Gang Chen, Author, Architect, LEED AP BD+C (GreenExamEducation.com)

• Profit is calculated as total revenue less total expenses. Profit is just a number and does not take sides.

Total revenue: 187,500 = 100%
Expenses: \$75.00 x 1900 = \$142,500
Total revenue - Total expenses = 187,500 - 142,500 = 45,000
Profit: 45,000 = 24% and not 18%
• \$187,500 is the Net Operating Revenue. It should have been clearly defined in the question.

Gang Chen, Author, Architect, LEED AP BD+C (GreenExamEducation.com)

• Thank you Valerie and Gang for going in depth on this question.

• Great!

So what is the correct answer and how did you get there?