Practice Exam Question - Gross Fee Profit
Hi, this question confuses me. Profit should be built into each staff member's billing rates. What is this gross fee profit percentage? I thought it was a distractor because that is not how a firm would calculate profit on a project. It's built into the billing rates of each employee. You use those billing rates to develop a work plan and/or ascertain how many hours can be spent on a given task. If you add this gross profit multiplier and then do your work plan then you double count the profit. Am I missing something here?
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I believe it says gross fee so you know you are calculating the profit out of the full architect fee, not after consultants get paid.
The fee is 250k, you calculate 10%, which is 25k, that's the profit. Also, 35% of 250k is 87.5k, that's consultants fee. You subtract those two amounts from the total fee of 250k and get how much needs to go in labor.
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