ARE 5.0 Handbook | PjM | Section 4
Sample Item 9 on page 45 | Calculate the increase in labor and materials compared to the current project budget.
To my understanding, the answer provided on page 46 is incorrect. The issue relates to calculating profit. See below for the question and rationale.
NCARB's Answer | $19,691
My Answer |$20,900
The discrepancy relates to Step 3.
NCARB calculates the total cost by multiplying the construction cost by 1.1 (i.e., break even % + target profit %). Instead, I calculated the total cost by dividing the construction cost by .9 (i.e., inverse target profit percentage).
To my understanding, the multiplication method used by NCARB represents a mark-up of 10%...not a profit of 10%.
Any help or additional insight would be very much appreciated!
Refer to AHPP Chapters 7.3 & 7.3 regarding fee and profit calculations.
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