ARE 5.0 Practice Management – Brightwood
UPDATED ACTUAL Exam Questions and
CORRECT Answers
overhead expense - CORRECT ANSWER - Indirect expense, that is, expenses indirectly
incurred and not chargeable to a specific project. Also called indirect expense.
direct expense - CORRECT ANSWER - Expense directly incurred by or attributable to a
specific project.
Professional Liability Insurance - CORRECT ANSWER - Insurance that financially
protects an architect against claims for damages resulting from professional negligence. Also
called errors and omissions insurance.
standard of care - CORRECT ANSWER - The requirement that a professional exercise
reasonable ability and judgement in a specific circumstance, the absence of which constitutes
negligence. Also called due care.
direct personnel expense (DPE) - CORRECT ANSWER - Salaries and wages attributed to
a specific project, plus benefits such as employment taxes, insurance, sick leave, holidays,
vacations, pensions, and similar contributions and benefits.
indirect expense - CORRECT ANSWER - Expense indirectly incurred and not chargeable
to a specific project. Also called overhead expense.
errors and omissions insurance - CORRECT ANSWER - Insurance that financially
protects an architect against claims for damages resulting from professional negligence. Also
called professional liability insurance.
due care - CORRECT ANSWER - The requirement that a professional exercise reasonable
ability and judgement in a specific circumstance, the absence of which constitutes negligence.
Also called standard of care.
, profit/loss statement - CORRECT ANSWER - Shows the final outcome of the firm's
financial performance over the past financial year. An income statement is a financial statement
that shows sales, cost of sales, gross margin, operating expenses, and profits or losses. Gross
margin is sales less cost of sales, and profit (or loss) is gross margin less operating expenses and
taxes. The result is profit if positive, loss if negative.
financial year - CORRECT ANSWER - A 12-month period of business activity. A firm's
financial year can run over any 12-month period it chooses, although the most common year-
ends are March 31, June 30, and December 31.
balance sheet - CORRECT ANSWER - A financial statement of an individual, company, or
organization that shows assets and liabilities (money owned) at a specific date.
boilerplate - CORRECT ANSWER - A section of standard text, especially a contract
clause, inserted into legal documents. The main sense of the "boilerplate" meaning is that the text
is already existing and available to use, is quite fixed, needing little or no alteration, and by
implication has a proven and trusted validity or suitability, and is therefore an aid to saving effort
and cost compared with originating an equivalent clause from nothing.
fixed fee proposal - CORRECT ANSWER - A type of cost proposal where the fees for the
architect's services are predetermined, giving the owner more predictability in the soft costs of
the project. The architect typically is more at risk in this scenario, as it is difficult to accurately
predict the amount of effort that may be required over the life of a project.
hourly fee proposal - CORRECT ANSWER - A type of cost proposal where the architect
invoices the owner directly for all costs of basic services incurred on the project (assessed
hourly) with no fixed limit. The owner is not able to completely predict the cost of service.
hourly not-to-exceed (NTE) proposal - CORRECT ANSWER - A type of cost proposal
where the architect invoices the owner for all costs of basic services incurred on the project, up
to a predetermined fixed limit that will not be exceeded. Generally the most fair for both parties;
gives the owner predictability for budgeting and the architect some flexibility in fee.
UPDATED ACTUAL Exam Questions and
CORRECT Answers
overhead expense - CORRECT ANSWER - Indirect expense, that is, expenses indirectly
incurred and not chargeable to a specific project. Also called indirect expense.
direct expense - CORRECT ANSWER - Expense directly incurred by or attributable to a
specific project.
Professional Liability Insurance - CORRECT ANSWER - Insurance that financially
protects an architect against claims for damages resulting from professional negligence. Also
called errors and omissions insurance.
standard of care - CORRECT ANSWER - The requirement that a professional exercise
reasonable ability and judgement in a specific circumstance, the absence of which constitutes
negligence. Also called due care.
direct personnel expense (DPE) - CORRECT ANSWER - Salaries and wages attributed to
a specific project, plus benefits such as employment taxes, insurance, sick leave, holidays,
vacations, pensions, and similar contributions and benefits.
indirect expense - CORRECT ANSWER - Expense indirectly incurred and not chargeable
to a specific project. Also called overhead expense.
errors and omissions insurance - CORRECT ANSWER - Insurance that financially
protects an architect against claims for damages resulting from professional negligence. Also
called professional liability insurance.
due care - CORRECT ANSWER - The requirement that a professional exercise reasonable
ability and judgement in a specific circumstance, the absence of which constitutes negligence.
Also called standard of care.
, profit/loss statement - CORRECT ANSWER - Shows the final outcome of the firm's
financial performance over the past financial year. An income statement is a financial statement
that shows sales, cost of sales, gross margin, operating expenses, and profits or losses. Gross
margin is sales less cost of sales, and profit (or loss) is gross margin less operating expenses and
taxes. The result is profit if positive, loss if negative.
financial year - CORRECT ANSWER - A 12-month period of business activity. A firm's
financial year can run over any 12-month period it chooses, although the most common year-
ends are March 31, June 30, and December 31.
balance sheet - CORRECT ANSWER - A financial statement of an individual, company, or
organization that shows assets and liabilities (money owned) at a specific date.
boilerplate - CORRECT ANSWER - A section of standard text, especially a contract
clause, inserted into legal documents. The main sense of the "boilerplate" meaning is that the text
is already existing and available to use, is quite fixed, needing little or no alteration, and by
implication has a proven and trusted validity or suitability, and is therefore an aid to saving effort
and cost compared with originating an equivalent clause from nothing.
fixed fee proposal - CORRECT ANSWER - A type of cost proposal where the fees for the
architect's services are predetermined, giving the owner more predictability in the soft costs of
the project. The architect typically is more at risk in this scenario, as it is difficult to accurately
predict the amount of effort that may be required over the life of a project.
hourly fee proposal - CORRECT ANSWER - A type of cost proposal where the architect
invoices the owner directly for all costs of basic services incurred on the project (assessed
hourly) with no fixed limit. The owner is not able to completely predict the cost of service.
hourly not-to-exceed (NTE) proposal - CORRECT ANSWER - A type of cost proposal
where the architect invoices the owner for all costs of basic services incurred on the project, up
to a predetermined fixed limit that will not be exceeded. Generally the most fair for both parties;
gives the owner predictability for budgeting and the architect some flexibility in fee.
