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Cost Accounting And Financial Management For Construction Project Managers 1st Edition Len Holm - Solutions
Assume you were the PE for the construction of a new aerospace manufacturing facility. The facility manager has made a warranty claim regarding the fire alarm system – evidently it goes off everyday at 11:00 am and everyone gets to take an early lunch. You have notified the electrical
Our case study contractor, ECC, has received partial TCO approval from the AHJ for floors 1 and 2 and the garage. Olympic Hotel and Resort wants to conduct a ‘soft’ opening for a small one-week conference for 50 guests. The hotel only has 30 rooms on the second floor so a nearby hotel will
What are some other combinations of interest and years that meet the rule of 72?
Why does a GC concern itself with a subcontractor’s financial strength?
Why should a PM and cost engineer be aware of TVM?
At what interest rate (i) would a PV of $100 be the same as a FV of $100 in any given year (n)?
Do you have money in a savings account? You should! How much interest are you earning? Is it enough? If left in place at this interest rate, when would your savings account double?
If your great aunt had left you an inheritance of $10,000 in 1980, and it had been locked up in a certificate of deposit at an interest rate equal to the inflation rate at that time, i.e. the same amount per year (lucky you!), how much would it be worth today at a) a simple interest rate, and/or b)
What is the FV of a $1 million investment made today ten years from now with an anticipated 15% annual ROE?
What is the present value of a lump sum $300,000 inheritance received 40 years from now assuming a 2% inflation rate?
If an investment is made today of $400,000 at a guaranteed rate of 5%, how many years will it need to be invested to realize a FV of $1,000,000?
Assume that your $250,000 investment made today will realize you $2,500,000 in 20 years in the future. What was your annual ROE?
Which craft in Table 18,2 has the highest: a) Bare wage rate, b) Total labor burden, c) Percentage markup for labor burden,d) Loaded wage rate? Table 18.2 Labor burden Construction Craft Carpenters Cement Masons Electricians Equipment Operators Ironworkers Laborers Plumbers Base Wage $39 $32 $43
What is the difference between a marginal tax rate and an effective or average tax rate?
What is the difference between labor burden and labor benefits?
Other than roads and schools, what might taxes be used to pay for?
What types of legal business organizational structures are subject to double income tax?
What are some of the different ways a construction firm owner, who is both an equity partner and a company employee, can financially benefit through the ownership of a construction company? There are several.
Looking at the leverage Example Two included earlier, how many projects could be leveraged and what ROI would a developer realize if he or she only had to put down 10% for each project?
What is the structure of the payback difference for a GC for a short-term versus a long-term loan?
If a GC is running short on operational cash, why doesn’t the business owner just contribute more of his or her own personal cash?
What is a developer’s ‘draw’?
What is a ‘debt service’?
What is the difference between a cap rate and an interest rate?
Why would a contractor keep its development operations separate from its construction operations?
What is the difference between a spec real estate developer and a build-to-suit client?
Why do so many participants in the BE want to become developers?
Why would a bank not want to loan a developer to purchase bare land or loan for soft costs necessary to perform a feasibility study?
Why does a construction loan cost 1–2% more in interest than a permanent loan?
Which firm would likely realize the largest profit potential, an at-risk developer or a fee developer?
Which firm would go bankrupt if a project was completed but lost its tenant and sat vacant for several years: a) Fee developer, b) At-risk developer, c) Architect, d) Real estate broker,e) GC?
The word ‘pro forma’ sounds similar to the word ____________.
Other than their personal homes, what might equity owners be required to pledge for loan collateral?
The developer’s pro forma continues to be modified and improved with increased accuracy throughout the development process. What other contractor-generated financial document and cost reporting process discussed earlier in this book improved accuracy throughout the course of construction?
Putting on your construction hat, what are three items which would be included under ‘land improvements’?
What risks does a developer have by modifying the pro forma to make the project appear more profitable than it might actually be?
There are many companies and individuals which might participate in a real estate development organization chart. The generic development organization chart included here has a few of them. List three more.
If one floor of garage below grade is added to the example pro forma at 20,000 gross square feet (GSF) using the parking stall efficiency figure of 350 SF/stall and the rental of $200/stall, what did that do to the original pro forma?
We introduced a lot of new terms and abbreviations and acronyms and slang in this last chapter particular to real estate development. We did not include a separate glossary specific to this chapter, but the budding real estate development student might be interested in putting one together.
Why do we as project managers and project engineers need to know about accounting at thea) Home office and/orb) At the jobsite?
Which is the number one sign a contractor may be experiencing financial difficulties?
Of the construction company types discussed, which would most likely build:a. A golf course, b. The golf course clubhouse, c. The home for the golf professional adjacent to the 18th tee box?
Other than the earlier example, what mix of different construction uses (MXD) have you observed all in one structure?
What is the difference between cost ‘control’ and cost ‘management’? You may have to look forward for this one as well.
Other than the reasons given earlier, why might a contractor choose to bid a project?
Other than the signs given earlier, how might you notice a contractor, or subcontractor, is suffering financial difficulties?
Assume every student in your class starts a construction company next June. How many of them will declare bankruptcy within seven years of graduation? Hopefully not you!
Without looking at the organization chart on the eResource, draw one for the case study project from the information given earlier. You may want to thumb through the rest of the text for additional personnel and company names. After you are done, check it with the website.Did we forget anybody?
If you have already worked for a construction company, what subset of the construction industry did it specialize in?
What is the difference between a C corporation and an S corporation?
What is the difference between a CEO and a CFO?
Why would a construction company want to perform accounting operations out of the home office?
Why would a construction company want to perform accounting operations at the jobsite?
What is a CPA? Is this a person or a company?
Why would a contractor employ the services of an outside CPA versus an internal bookkeeper?
Who might the PM report to other than a CEO?
What type of construction firm ownership structures are subject to double taxation?
List at least two other staff positions in the home office beyond those provided in this chapter.
Why do you feel a speculative home builder does not carry 50 completed homes in inventory?
Other than the examples given earlier, what other industries are drastically different than construction?
What industries are similar to construction?
List another reason that the construction industry is different than other industries.
If you already work for a construction company, which of the ownership structures discussed earlier applies to your firm?
Not discussed in this text, but what items on a construction project might be vulnerable to external theft?
Construction CFOs are officers and often part-owners of the company. Why do you think that is?
This author’s construction consulting business is a sole proprietorship and utilizes the cash accounting method. Why do you think he made those choices?
Compare the four primary methods of construction accounting discussed in this chapter and compute the reported revenue, expenses, and income or profit for each, for a contractor which has only one project for the whole year as reflected in the following. Assume January 1 through December 31 fiscal
The construction industry today is ranked ____ among other GDP industries.
What are the advantages for an owner to utilize a traditional delivery method and a lump sum price? What are the disadvantages for a contractor for the same scenario?
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 10 companies, positions, and/or individuals. Make whatever assumptions as necessary.
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 heavy-civil project.
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 list for each team member, including due dates. Include a ‘check person’ for each major
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 Concrete Masonry Structural Steel Carpentry Waterproofing Evergreen Construction Company Work Breakdown
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’.
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