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cost accounting
Questions and Answers of
Cost Accounting
What are the disadvantages for an owner to utilize a DB delivery method and a cost plus percentage fee pricing scenario? What are the advantages for a contractor for the same scenario?
Why would a GC choose to locate their accounting operations at a) The home office, and/or conversely b) The jobsite office?
Why would a GC choose to bid a project? There are many potential reasons.
When is it acceptable for a client to let a project to bid? There are many potential reasons.
Why would a client choose one of the following pricing methods?a. Lump sum,b. Unit-price,c. Cost-plus, ord. GMP.
What are the differences between an agency CM and an at-risk CM?
What criteria would a project owner use to choose a GC on a bid project, and/or conversely a negotiated project?
How much more responsibility does a GC PM have in a sole-source organization versus a company which relies heavily on its staff organization?
Why do lump sum contracts, such as AIA A101, not differentiate between reimbursable versus non-reimbursable costs as does the AIA A102?
Why would a project owner choose to utilize one of the DB extended delivery methods, such as DBOM?
Draw an organization chart fora) Evergreen Construction Company and the Olympic Hotel and Resort case study project, orb) A project you have been working on outside of the classroom.Include at least
In addition to the engineers and consultants listed as built environment participants listed in this chapter, list one additional firm or type of firm.
Subcontractor types were not discussed specifically in this chapter or are a focus of this book.List three which would be on a) A typical commercial project, or b) A single family house, and/orc) A
Add one additional responsibility for each of the GC team members described in this chapter.
Match up the five project phases with the cost control cycle in Chapter.a) Planning: Estimateb) Startup: Correctc) Control: Record, Modifyd) Close-Out: Record, As-builde) Lessons-learned: As-build
What occurs with what?a) Planning: Estimateb) Startup: Correctc) Control: Record, Modifyd) Close-Out: Record, As-builde) Lessons-learned: As-build
What is the difference between a GMP cost estimate and a detailed cost estimate?
What are some of the risks a contractor faces when developing a cost estimate? There are several.
Why would you, as a PM or superintendent or cost engineer, want to be involved in the estimate (or schedule) development for your project?
Why should a contractor prepare its own preliminary construction schedule during the estimating process?
How does the 80-20 rule relate to estimate development?
Where do the most accurate estimate unit prices come from?
How do the terms of a GMP contract affect a contractor’s approach to estimate development?
What level of design (SD, DD, CD) is most commonly associated with a) Lump sum estimates, b) GMP estimates, c) Budget estimates?
If a GC’s pre-bid plug for cabinets is $100,000 and they do not receive a sub bid on bid day,what should they do?
How can a contractor minimize estimate errors?
Which of the three estimate types (budget, GMP, and lump sum bid) are the most accurate and which includes the highest contingency rates?
Using Figure 4.1 and the case study firms and individuals you can garner from several chapters throughout this text, and assuming a bid date three weeks from today, develop an estimating assignment
Expand the WBS in Figure 4.2 for the Olympic Hotel and Resort case study to the second and third levels for two CSI divisions such as 03 and 09.Figure 4.2 CSI 2 3 4 56780 7 Description Demolition
Without looking ahead, which of the major cost elements of the estimate do you believe deserves the greatest cost control focus and why that one?
List two other terms for ‘jobsite GCs’.
Why is there not just one standard GCs estimate template that can be used for each project?
What are the largest individual labor and material and equipment GCs items in the hotel case study estimate? Are these typical for all projects?
Earlier it was proposed a crane should be charged to the direct work if possible such as to steel erection. Why is a tower crane then included as a standard item in the GCs estimate template included
What type of project would warrant a jobsite cost accountant?
The abbreviation GCs has been used a lot in this chapter for general conditions. What is that abbreviation also used for?
Research AIA A102 and in what specific articles and paragraphs would the GC insert jobsite reimbursable costs?
Explain why it might be acceptable for a contractor to have a GCs estimate percentage out of the standard range, for example a) 3%, b) 12%.
Other than trying to keep costs down, why would an owner not want a contractor to include a standard GCs percentage add-on for every change order, regardless of scope?
Should a contractor be required to provide a credit for GCs if scope is reduced but the schedule remains constant?
Looking at the long-form GCs template on the eResource, are there any additional items you as an estimator would have included on the hotel case study estimate?
Other than the examples listed with ‘Strategies’ earlier, how might you suggest a contractor save on jobsite GCs cost?
Assume the client for the hotel case study has added one month to the project before the contract was negotiated and is allowing a corresponding change to the jobsite GCs estimate and total contract
Forklifts are customarily one of the most expensive GCs equipment expenses. Prepare an argument fora) why a dedicated forklift operator should be estimated and included in the GCs estimate and/or
Looking ahead at the list of home office overhead items in Chapter 6, which ones might be moved to the jobsite fora) a small project which accounted for only 5% of the firm’s volume and/or
Is the ‘no claim for delay’ clause fair for contractors? Why do sophisticated clients insert this?How might a compromise be achieved?
Why do we even bother with a discussion of HOOH when our discussion in this book is focused on jobsite financial management issues?
List three different uses for the term ‘general conditions.
Is HOOH billable to the client ona) lump sum jobs, and/orb) open-book negotiated jobs?
How does the contractor find out what home office personnel may be charged to a project, and when should this be investigated?
If the small spec home builder in Example Three had changed his volume toa) just one home per year, or converselyb) to 20 homes per year, would he have been more successful and been able to make a
Looking back to the breakeven Table 6.1, how can the contractor increase its profit percentage by reducing volume? Table 6.1 Breakeven analysis Ideal Revenue Breakeven Revenue Without Profit
When should the PM be located at the home office or the jobsite and is he or she then billable?
Without looking at the detailed home office GCs estimate on the eResource, what other items might be included beyond those which were listed in Figure 6.1? Evergreen Construction Company Annual Home
What happens if you as a PM do not make your bid fee a) On one project,b) On all of your projects?
What happens to the construction company if it doesn’t make a profit a) For one year,b) For several years in a row?
How might construction costs be reduced?
Safety is not a topic in a discussion of cost accounting and financial management, but maybe it should be. How can an unsafe construction project cost more money?
If your CEO suddenly hired several new home office employees such as an additional marketing director, assistant payroll clerk, and a vice president in charge of estimating, what is the short-term
Prepare a net profit equation starting with revenue or construction contract, and apply a series of deductions, including all of the equation variables presented in this chapter, until net profit is
Review the expanded home office GCs estimate for ECC from the eResource and identify five line items which are examples of fixed overhead and five which are examples of variable overhead. Do not
What is the minimum fee, in both dollars and percentage of construction contract, a general contractor would need on an upcoming $10 million bid project? Assume the following parameters: $100 million
Resolve the following breakeven questions using Table 6.1 There are an unlimited amount of questions and exercises that can be based on this table and analysis:Table 6.1 a. What is the breakeven
Given the information provided here about ECC’s annual revenue and overhead expenses,how do they compare with the breakeven analysis of the contractor in Table 6.1? Table 6.1 Breakeven analysis
Why do PMs, PEs, superintendents, and jobsite cost accountants need to bother studying financial statements and financial ratios which are generated by the home office accounting department and the
Owner’s equity is a positive amount of money, at least the owners would hope so, yet it is regarded as a liability on the balance sheet. Why is that?
Why is the ROE ratio important to the officers of the construction company?
Starting with ‘Revenue,’ draft the long version of the income statement which includes all of the sub equations included in this chapter, and ending with ‘Net profit.’
Of all of the financial statements discussed in this chapter (balance sheet, income statement,job cost history report, labor report, and equipment ledger) which one would the construction company
Combining Tables 7.1 and 7.2, what was ECC’s ROE and does that fall within the acceptable range? Table 7.1 Balance sheet Code 110 120 130 140 150 160 170 180 190 199 210 230 240 270 289 290 300
Which ratio should be higher for a contractor which has been in business for over ten years,ROE or ROA, and why that choice?
Wheely, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a
Adventure Parks Inc. (API) operates 10 theme parks throughout the United States. The company’s slogan is “Name Your Adventure,” and its mission is to offer an exciting theme park experience to
Assume the same facts as in Problem 21-29, except that the plant is located in Austin, Texas. Clean Chips has no special waiver on income taxes. It pays a 30% tax rate on all income. Proceeds from
Assume the same facts as in Exercise 21-18 except that City Hospital is a taxpaying entity. The income tax rate is 30% for all transactions that affect income taxes.Required:1. Do requirement 1 of
Riverbend Company runs hardware stores in a tristate area. Riverbend’s management estimates that if it invests $250,000 in a new computer system, it can save $65,000 in annual cash operating costs.
To be sure that you understand how to use the tables in Appendix A at the end of this book, solve the following exercises. Ignore income tax considerations. The correct answers, rounded to the
Assume the same facts as in Problem 20-33 except now there are only two trigger points: Completion of good finished units of product and Sale of finished goods.1. Prepare summary journal entries for
Refer to the information presented in Exercise 19-23. The head of the registration advisors at SMU has decided that the advisors must finish their advising in 2 weeks and therefore must advise 420
The registration advisors at a small Midwestern university (SMU) help 4,200 students develop their class schedules and register for classes each semester. Each advisor works for 10 hours a day during
Refer to the information in Problem 18-31.Required:Do Problem 18-31 using the FIFO method of process costing.Data From Problem 18-31:The Seafood Company is a food-processing firm based in Maine. It
Refer to the information in Exercise 18-17. Suppose Gray Manufacturing Company uses the FIFO method of process costing instead of the weighted-average method.Required:Compute equivalent units for
Refer to the information in Problem 17-34. Suppose that Larsen Company uses the FIFO method instead of the weighted-average method in all of its departments. The only changes to Problem 17-34 under
Larsen Company, as you know, is a manufacturer of car seats. Each car seat passes through the assembly department and testing department. This problem focuses on the testing department. Direct
1. Do Problem 17-31 using the FIFO method of process costing. Explain any difference between the cost per equivalent unit in the assembly department under the weighted-average method and the FIFO
Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The
The assembly division of Fenton Watches, Inc., uses the weighted-average method of process costing. Consider the following data for the month of May 2014:Required:Compute equivalent units for direct
Refer to requirement 2 of Exercise 17-16.Required:Prepare summary journal entries for the use of direct materials and incurrence of conversion costs. Also prepare a journal entry to transfer out the
Tasty, Inc., is a producer of potato chips. A single production process at Tasty, Inc., yields potato chips as the main product and a byproduct that can also be sold as a snack. Both products are
Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsalable intermediate products: ICR8, ING4, and XGE3. These intermediate products are
Quality Chicken is computing the ending inventory values for its July 31, 2014, balance sheet. Ending inventory amounts on July 31 are 15 pounds of breasts, 4 pounds of wings, 6 pounds of thighs, 5
Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2014 is as follows:Joint cost of production in July 2014
Consider E-books again. The controller of E-books reads a widely used textbook that states that “the reciprocal method is conceptually the most defensible.” He seeks your assistance.Required:1.
E-books, an online book retailer, has two operating departments—corporate sales and consumer sales—and two support departments—human resources and information systems. Each sales department
Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt’s new controller, your manager asks you
Instant Service (IS) repairs printers and photocopiers for five multisite companies in a tristate area. IS’s costs consist of the cost of technicians and equipment that are directly traceable to
Why is customer-profitability analysis an important topic to managers?
Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details
Calvert Associates prepares architectural drawings to conform to local structural-safety codes. Its income statement for 2013 is as follows:Following is the percentage of time spent by professional
What is life-cycle budgeting?
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