Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1)
1)
Which of the following is not used to calculate the contribution margin?
A)
Revenues
B)
Variable overhead
C)
Fixed overhead
D)
Construction costs
Answer:
C
A)
B)
C)
D)
2)
2)
Which of the following are not included in the best–value scoring criteria in the book?
A)
Design
B)
Contractor’s track record
C)
Enhancements
D)
Public relations
Answer:
B
A)
B)
C)
D)
3)
3)
Which of the following are benefits of specialization?
A)
Allows a company to develop relationships with subcontractors in the area of specialization
B)
A company learns better ways of performing the work.
C)
Allows a company to perform a more diverse range of work
D)
A and B
Answer:
D
A)
B)
C)
D)
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4)
4)
Which of the following is not a reason for a company to increase its profit and overhead markup
on a bid?
A)
The competition for work is intense.
B)
The company is checking its pricing.
C)
The project is difficult.
D)
The company expects competitors to charge a higher profit and overhead markup.
Answer:
A
A)
B)
C)
D)
5)
5)
The break–even volume of work is expressed in which of the following units?
A)
Dollars of revenue
B)
Dollars of construction costs
C)
Number of jobs
D)
Square footage constructed
Answer:
A
A)
B)
C)
D)
6)
6)
Revenues are used for which of the following?
A)
Pay overhead costs
B)
Pay construction costs
C)
Provide a profit for the investors
D)
All of the above
Answer:
D
A)
B)
C)
D)
7)
7)
Which of the following equations cannot be used to calculate profit?
A)
Contribution margin ratio × Revenues – Fixed overhead
B)
Contribution margin – Overhead
C)
Contribution margin – Fixed overhead
D)
Revenues – Construction costs – Overhead
Answer:
B
A)
B)
C)
D)
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8)
8)
Which of the following cannot be used to increase a company’s break–even volume of work?
A)
Reducing prices
B)
Increasing contribution margin ratio
C)
Reducing construction costs
D)
Reducing fixed overhead
Answer:
A
A)
B)
C)
D)
9)
9)
Which of the following equations would be used to calculate the contribution margin ratio?
A)
1 –Construction costs
Revenues –Fixed overhead
Revenues
B)
Contribution margin × Revenues
C)
Contribution margin
Revenues
D)
A and B
Answer:
C
A)
B)
C)
D)
10)
10)
Which of the following are considered revenues?
A)
Payments from project owners
B)
Payments for utility bills for the main office
C)
Payments for materials
D)
Payments to employees
Answer:
A
A)
B)
C)
D)
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
11)
For the best–value scoring criteria in the book, what would be included in the scoring of the project plan?
Answer:
The project plan includes the qualification of the personnel that will be assigned to the project, the
company’s approach to quality control/quality assurance, the company’s approach to safety, and the
company’s performance record.
12)
How is the profit and overhead markup related to the gross profit margin?
Answer:
The gross profit margin and the profit and overhead markup are related by the following equation:
Profit and overhead markup =Gross profit margin
100 – Gross profit margin
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13)
Define contribution margin.
Answer:
The contribution margin is the amount of money that a project or projects contribute to the company to
be used to pay for the fixed overhead and provide a profit for the stakeholders.
14)
How can a company estimate the volume of work for the next year?
Answer:
The volume of work may be estimated by looking at historical levels of work and making adjustments
to reflect the economic conditions. Alternately, the volume of work may be projected based on the
work the company thinks it can get during the upcoming year.
15)
Why should a company perform a break–even analysis?
Answer:
The object of looking at the profit equation and performing a break–even volume of work or
break–even contribution margin ratio analysis is to clarify how the company is going to make a profit.
16)
What are the expectations of investors in a construction company?
Answer:
The investors in a construction company expect that the money they have invested in the company will
be used to supply the cash needed to operate the construction company and that the company will
generate a profit, thus increasing the value of their investment.
17)
The contribution margin and fixed overhead may be plotted on a graph. Where does the break–even volume
of work occur?
Answer:
The break–even volume occurs where these two lines intersect.
18)
What potential problem occurs when a company focuses on increasing its volume of work without taking
profit into account?
Answer:
When a company focuses on volume of work without taking into account profit, it often settles for
smaller profit margins or takes unprofitable work to increase its volume of work. These increases in the
volume of work are often accompanied by the need to increase its main office support, thus increasing
general overhead.
19)
Define best value.
Answer:
A combination of product, price, and service.
20)
What is a key goal for a construction company?
Answer:
A key goal for any construction company is to make money or profit.
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Answer Key
Testname: C10
1)
C
2)
B
3)
D
4)
A
5)
A
6)
D
7)
B
8)
A
9)
C
10)
A
11)
The project plan includes the qualification of the personnel that will be assigned to the project, the company’s
approach to quality control/quality assurance, the company’s approach to safety, and the company’s performance
record.
12)
The gross profit margin and the profit and overhead markup are related by the following equation:
Profit and overhead markup =Gross profit margin
100 – Gross profit margin
13)
The contribution margin is the amount of money that a project or projects contribute to the company to be used to pay
for the fixed overhead and provide a profit for the stakeholders.
14)
The volume of work may be estimated by looking at historical levels of work and making adjustments to reflect the
economic conditions. Alternately, the volume of work may be projected based on the work the company thinks it can
get during the upcoming year.
15)
The object of looking at the profit equation and performing a break–even volume of work or break–even contribution
margin ratio analysis is to clarify how the company is going to make a profit.
16)
The investors in a construction company expect that the money they have invested in the company will be used to
supply the cash needed to operate the construction company and that the company will generate a profit, thus
increasing the value of their investment.
17)
The break–even volume occurs where these two lines intersect.
18)
When a company focuses on volume of work without taking into account profit, it often settles for smaller profit
margins or takes unprofitable work to increase its volume of work. These increases in the volume of work are often
accompanied by the need to increase its main office support, thus increasing general overhead.
19)
A combination of product, price, and service.
20)
A key goal for any construction company is to make money or profit.
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