PCM 621-629 hard
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Questions and Answers

In the example provided, what was the total amount earned when utilized?

  • $3,000.00
  • $15,000.00
  • $0.00
  • $60,000.00 (correct)
  • What phase was not part of the compensation in the owner-architect agreement but was used internally to recognize revenue for work completed prior to the initiation of actual Schematic Design?

  • Preliminary Design (correct)
  • Project Planning
  • Schematic Design
  • Project Delivery
  • What does the example demonstrate regarding direct expenses and contingencies?

  • They are billed separately from the project closeout.
  • They are reimbursed at project closeout.
  • They are incurred and utilized at project closeout.
  • They are withheld internally until project closeout. (correct)
  • What is the central element in establishing and updating accounting budgets?

    <p>Project work planning with proper level of task detail</p> Signup and view all the answers

    What is fundamental to a firm’s operations and the foundation for critical, high-level decisions such as staff adjustments and overhead budgeting?

    <p>Good revenue projections</p> Signup and view all the answers

    Who earns revenue by providing professional services according to the text?

    <p>Architects</p> Signup and view all the answers

    What does project work planning serve as, in addition to being a role expected of project managers?

    <p>An opportunity for project team-building and leadership</p> Signup and view all the answers

    What does the Design Project Management accrual method focus on?

    <p>Work in place and earning revenue based on it</p> Signup and view all the answers

    What is a characteristic of the Top-Down approach in project budgeting?

    <p>Based on historical data and similar project scopes, can be accurate</p> Signup and view all the answers

    What is a characteristic of the Bottom-Up approach in project budgeting?

    <p>Based on project work plan and scope, schedule, and tasks</p> Signup and view all the answers

    What is the best practice for creating a realistic plan in project budgeting?

    <p>Work with both top-down and bottom-up approaches</p> Signup and view all the answers

    What does the project leadership team need to consider when creating a feasible plan?

    <p>Scope, schedule, tasks, and resources</p> Signup and view all the answers

    What should coincide with initial project budgeting in a firm's accounting or project management system?

    <p>Client, consultant, and contract status documentation</p> Signup and view all the answers

    What needs to be verified during initial project budgeting?

    <p>Project contract is fully executed or a letter of understanding is signed</p> Signup and view all the answers

    What must be ensured during initial project budgeting?

    <p>Owner-architect agreement and consultant agreements are signed.</p> Signup and view all the answers

    What is the formula for Net Service Revenue (NSR) as per the given text?

    <p>$A - B$</p> Signup and view all the answers

    What should be required by policy at a minimum, according to the text?

    <p>A signed letter of agreement</p> Signup and view all the answers

    What are contingencies typically not targeted for, according to the text?

    <p>'Extra' profit</p> Signup and view all the answers

    What sets up different amounts by phase between internal budgets and contractual fees billed to clients?

    <p>Revenue recognition</p> Signup and view all the answers

    What tool can be used for 'high-level' resource planning during the initial budgeting process, as per the text?

    <p>Table 10.7</p> Signup and view all the answers

    What represents a tool that can be used for 'high-level' resource planning during the initial budgeting process?

    <p>Table 10.9</p> Signup and view all the answers

    What is used to recognize work that was in place and complete, as per the text?

    <p>Earned revenue vs. billed fees</p> Signup and view all the answers

    What should firms establish guidelines for, based on past project data?

    <p>Contingencies</p> Signup and view all the answers

    What may most engineering disciplines do in early project phases?

    <p>Lag behind in actual percentages complete and catch up toward the end of Construction Documents.</p> Signup and view all the answers

    What is typically compensated for 15 percent of the contractual amount for Schematic Design?

    <p>The architect</p> Signup and view all the answers

    What does Table 10.8 exemplify according to the text?

    <p>Resource planning</p> Signup and view all the answers

    What does Table 10.10 represent according to the text?

    <p>'Earned Revenue vs. Billed Fees'</p> Signup and view all the answers

    What is the primary purpose of resource utilization ratios in project management?

    <p>To measure project chargeable time against total time worked for profitability and forecasting</p> Signup and view all the answers

    In a well-designed business plan, what is expected to be included regarding staff members?

    <p>Expected utilization ratios for all firm staff members</p> Signup and view all the answers

    When should project work plans be prepared according to the text?

    <p>Early in the marketing phase, starting with top-down budgets and simple project work plans</p> Signup and view all the answers

    Who should be involved in finalizing the project work plan according to the text?

    <p>The project team, including client and contractor input</p> Signup and view all the answers

    What is emphasized as essential for achieving project and firm profitability?

    <p>Project work planning</p> Signup and view all the answers

    What is the starting point for project budgeting according to the text?

    <p>&quot;Determining the gross fee for the project, typically based on market rates&quot;</p> Signup and view all the answers

    What are some common compensation options mentioned in the text?

    <p>Lump sum fixed fees, hourly billing rates, cost plus fixed fees, unit cost pricing, and percentage of actual construction cost</p> Signup and view all the answers

    What are two methods mentioned for revenue recognition in professional service firms?

    <p>Cash method or accrual method</p> Signup and view all the answers

    What is emphasized as a collaborative effort in project work planning according to the text?

    <p>Among project managers, key team members, and accounting staff with open communication and client involvement</p> Signup and view all the answers

    What is stressed as crucial for monitoring project progress according to the text?

    <p>Scheduling milestones</p> Signup and view all the answers

    What is mentioned as a more accurate representation of financial performance?

    <p>Accrual method for revenue recognition</p> Signup and view all the answers

    Study Notes

    • Resource utilization ratios, measuring project chargeable time against total time worked, are crucial for project profitability and future forecasting at the firm, market sector, discipline, and project levels.
    • A well-designed business plan includes expected utilization ratios for all firm staff members.
    • Project work planning is essential for achieving project and firm profitability, scheduling milestones, and monitoring project progress.
    • Project work plans should be prepared early in the marketing phase, starting with top-down budgets and simple project work plans, then refining with more detailed planning during contract discussions.
    • The project work plan must be finalized with the contracted scope of services and the project team, including client and contractor input.
    • Project work planning is a collaborative effort among project managers, key team members, and accounting staff, with open communication and client involvement.
    • Project budgeting starts with determining the gross fee for the project, typically based on market rates.
    • Common compensation options include lump sum fixed fees, hourly billing rates, cost plus fixed fees, unit cost pricing, and percentage of actual construction cost.
    • Revenue recognition in professional service firms can be based on the cash method or the accrual method, with the accrual method providing a more accurate representation of financial performance.

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    Test your knowledge of project management budgeting methods with this quiz. Learn about the Design Project Management accrual method, cash basis, top-down and bottom-up project budgeting approaches, and more.

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