AACE CCT PRIMER FINAL EXAM ACTUAL QUESTIONS AND
ANSWERS GRADED A+
✔✔Types of Valuation - ✔✔Reproduction, Replacement Costs, Fair Value, Market
Value, Book Value, Residual/Economic Value, Operating Cost
✔✔Reproduction Costs - ✔✔The cost of reproducing substantially the identical item or
facility at a
price level as of the date specified
✔✔Replacement Costs - ✔✔Is the cost new of an item having the same or similar utility
[S&K 5th Ed.,
6.1].
✔✔Fair Value - ✔✔Is the adjusted cost new of an item, giving consideration for the cost
of
similar items, and taking into account utility and all standard adjustments
and discounts to list price [S&K 5th Ed., 6.1].
✔✔Types of Market Value - ✔✔Fair Market Value-in-Place, Fair Market Value-in-
Exchange, Orderly Liquidation Value, Forced Liquidation Value, Salvage Value/Part-Out
Value, Scrap Value
✔✔Fair Market Value-in-Place - ✔✔amount expressed in terms of money that may
reasonably be expected to exchange between a willing buyer and a willing seller with
equity to both, neither under any compulsion to buy or sell, and both fully aware of all
relevant facts as of a certain date, and taking into account installation and
the contribution of the item to the operating facility [S&K 5th Ed.,6.1].
✔✔Fair Market Value-in-Exchange - ✔✔value of equipment in terms of the money that
can be expected to be exchanged in a thirdparty transaction between a willing buyer,
who is under no compulsion to buy, and a willing seller, who is under no compulsion to
sell, both being fully aware of all relevant facts (also referred to as retail value) [S&K 5th
Ed., 6.1].
✔✔Orderly Liquidation Value - ✔✔probable price for all capital assets and equipment in
terms of money that could be realized from a properly executed orderly liquidation type
of sale, given a maximum time of six months to conduct such sale and adequate
funds available for the remarketing campaign. (also referred to as
wholesale value) [S&K 5th Ed., 6.1].
✔✔Forced Liquidation Value - ✔✔value of equipment in terms of money that can be
derived from a properly advertised and conducted auction where time is of the essence
(also referred to as "under the hammer" or "blow-out" value) [S&K 5th Ed.]
,✔✔Salvage Value/Part-Out Value - ✔✔value of equipment in terms of money that a
buyer will pay to a seller, recognizing the component value of parts of the equipment
that can be used or resold to end-users, usually for repair or replacement purposes
[S&K 5th Ed., 6.2].
✔✔Scrap Value - ✔✔is the value of equipment in terms of money that relates to the
equipment's basic commodity value [S&K 5th Ed.,6.2].
✔✔Book Value (NET) - ✔✔(1) Current investment value on the books calculated as
original value less
depreciated accruals.
(2) New asset value for accounting use.
(3) The value of an outstanding share of stock of a corporation at any one
time, determined by the number of shares of that class outstanding
[RP10S-90].
✔✔Residual or Economic Value - ✔✔The value of property in view of all its expected
economic uses, as distinct
from its value in view of any particular use. Also, economic value reflects
the importance of a property as an economic means to an end, rather
than as an end in itself [RP10S-90].
✔✔Operating Cost - ✔✔The expenses incurred during the normal operation of a facility,
or
component, including labor, materials, utilities, and other related costs.
Includes all fuel, lubricants, and normally scheduled part changes in order
to keep a subsystem, system, particular item, or entire project
functioning. Operating costs may also include general building
maintenance, cleaning services, taxes, and similar items [RP10S-90].
✔✔Temporary Equipment: - ✔✔expensed items for construction, maintenance, etc)
✔✔Labor Burden - ✔✔Taxes and insurances the employer is required to pay by law
based on
labor payroll, on behalf of or for the benefit of labor. (In the US these are federal old age
benefits, federal unemployment insurance tax, state
unemployment tax, and worker's compensation) [RP10S-90].
✔✔Bare Labor - ✔✔Gross direct wages paid to the worker
✔✔Burdened Labor - ✔✔Gross direct wages paid to the worker, plus labor burden
✔✔All in Labor - ✔✔Gross direct wages paid to the worker, plus labor burden, plus field
indirects, plus general & administrative costs, plus profit [RP10S-90].
, ✔✔Exempt Employees - ✔✔Employees exempt from overtime compensation by federal
wage and
hours guidelines [RP10S-90].
✔✔Non-Exempt Employees - ✔✔Employees not exempt from overtime compensation
by US federal wage
and hours guidelines [RP10S-90].
✔✔General and Administrative Costs (G&A) - ✔✔The fixed cost incurred in the
operation of a business. G&A costs are also
associated with office, plant, equipment, staffing, and expenses thereof,
maintained by a contractor for general business operations. G&A costs are not
specifically applicable to any given job or project [RP10S-90].
✔✔Gross Profit - ✔✔Earnings from an on-going business after direct and project
indirect costs of goods sold have been deducted from sales revenue for a
given period.
✔✔Net Profit - ✔✔Earnings or income after subtracting miscellaneous income and
expenses (patent royalties, interest, capital gains) and federal income tax from
operating profit.
✔✔Operating Profit - ✔✔Earnings or income after all expenses (selling, administrative,
depreciation) have been deducted from gross profit
✔✔Indirect Labor - ✔✔The labor needed for activities that do not become part of the
final installation, product or goods produced, but that are required to complete the
project.
✔✔Small Tools and Consumables - ✔✔Small tools and consumables are required to
perform the work but not part of the final installation. Generally derived by a percentage
of the material cost.
✔✔Performance Bond - ✔✔essentially an insurance policy that the work will be
completed. The rates offered to a contractor are based on how financially
sound and capable a contractor has demonstrated themselves to be. Actual rates vary
from contractor to contractor, and from bonding company to bonding company. Care
should be taken to ascertain the bonding capacity of a contractor prior to award.
✔✔Bid Bonds - ✔✔A bond that guarantees the bidder will enter into a contract on the
basis of the bid
✔✔Payment Bond - ✔✔bond that is executed in connection with a contract and
which secures the payment of all persons supplying labor and materials in the
prosecution of the work provided for in the contract
ANSWERS GRADED A+
✔✔Types of Valuation - ✔✔Reproduction, Replacement Costs, Fair Value, Market
Value, Book Value, Residual/Economic Value, Operating Cost
✔✔Reproduction Costs - ✔✔The cost of reproducing substantially the identical item or
facility at a
price level as of the date specified
✔✔Replacement Costs - ✔✔Is the cost new of an item having the same or similar utility
[S&K 5th Ed.,
6.1].
✔✔Fair Value - ✔✔Is the adjusted cost new of an item, giving consideration for the cost
of
similar items, and taking into account utility and all standard adjustments
and discounts to list price [S&K 5th Ed., 6.1].
✔✔Types of Market Value - ✔✔Fair Market Value-in-Place, Fair Market Value-in-
Exchange, Orderly Liquidation Value, Forced Liquidation Value, Salvage Value/Part-Out
Value, Scrap Value
✔✔Fair Market Value-in-Place - ✔✔amount expressed in terms of money that may
reasonably be expected to exchange between a willing buyer and a willing seller with
equity to both, neither under any compulsion to buy or sell, and both fully aware of all
relevant facts as of a certain date, and taking into account installation and
the contribution of the item to the operating facility [S&K 5th Ed.,6.1].
✔✔Fair Market Value-in-Exchange - ✔✔value of equipment in terms of the money that
can be expected to be exchanged in a thirdparty transaction between a willing buyer,
who is under no compulsion to buy, and a willing seller, who is under no compulsion to
sell, both being fully aware of all relevant facts (also referred to as retail value) [S&K 5th
Ed., 6.1].
✔✔Orderly Liquidation Value - ✔✔probable price for all capital assets and equipment in
terms of money that could be realized from a properly executed orderly liquidation type
of sale, given a maximum time of six months to conduct such sale and adequate
funds available for the remarketing campaign. (also referred to as
wholesale value) [S&K 5th Ed., 6.1].
✔✔Forced Liquidation Value - ✔✔value of equipment in terms of money that can be
derived from a properly advertised and conducted auction where time is of the essence
(also referred to as "under the hammer" or "blow-out" value) [S&K 5th Ed.]
,✔✔Salvage Value/Part-Out Value - ✔✔value of equipment in terms of money that a
buyer will pay to a seller, recognizing the component value of parts of the equipment
that can be used or resold to end-users, usually for repair or replacement purposes
[S&K 5th Ed., 6.2].
✔✔Scrap Value - ✔✔is the value of equipment in terms of money that relates to the
equipment's basic commodity value [S&K 5th Ed.,6.2].
✔✔Book Value (NET) - ✔✔(1) Current investment value on the books calculated as
original value less
depreciated accruals.
(2) New asset value for accounting use.
(3) The value of an outstanding share of stock of a corporation at any one
time, determined by the number of shares of that class outstanding
[RP10S-90].
✔✔Residual or Economic Value - ✔✔The value of property in view of all its expected
economic uses, as distinct
from its value in view of any particular use. Also, economic value reflects
the importance of a property as an economic means to an end, rather
than as an end in itself [RP10S-90].
✔✔Operating Cost - ✔✔The expenses incurred during the normal operation of a facility,
or
component, including labor, materials, utilities, and other related costs.
Includes all fuel, lubricants, and normally scheduled part changes in order
to keep a subsystem, system, particular item, or entire project
functioning. Operating costs may also include general building
maintenance, cleaning services, taxes, and similar items [RP10S-90].
✔✔Temporary Equipment: - ✔✔expensed items for construction, maintenance, etc)
✔✔Labor Burden - ✔✔Taxes and insurances the employer is required to pay by law
based on
labor payroll, on behalf of or for the benefit of labor. (In the US these are federal old age
benefits, federal unemployment insurance tax, state
unemployment tax, and worker's compensation) [RP10S-90].
✔✔Bare Labor - ✔✔Gross direct wages paid to the worker
✔✔Burdened Labor - ✔✔Gross direct wages paid to the worker, plus labor burden
✔✔All in Labor - ✔✔Gross direct wages paid to the worker, plus labor burden, plus field
indirects, plus general & administrative costs, plus profit [RP10S-90].
, ✔✔Exempt Employees - ✔✔Employees exempt from overtime compensation by federal
wage and
hours guidelines [RP10S-90].
✔✔Non-Exempt Employees - ✔✔Employees not exempt from overtime compensation
by US federal wage
and hours guidelines [RP10S-90].
✔✔General and Administrative Costs (G&A) - ✔✔The fixed cost incurred in the
operation of a business. G&A costs are also
associated with office, plant, equipment, staffing, and expenses thereof,
maintained by a contractor for general business operations. G&A costs are not
specifically applicable to any given job or project [RP10S-90].
✔✔Gross Profit - ✔✔Earnings from an on-going business after direct and project
indirect costs of goods sold have been deducted from sales revenue for a
given period.
✔✔Net Profit - ✔✔Earnings or income after subtracting miscellaneous income and
expenses (patent royalties, interest, capital gains) and federal income tax from
operating profit.
✔✔Operating Profit - ✔✔Earnings or income after all expenses (selling, administrative,
depreciation) have been deducted from gross profit
✔✔Indirect Labor - ✔✔The labor needed for activities that do not become part of the
final installation, product or goods produced, but that are required to complete the
project.
✔✔Small Tools and Consumables - ✔✔Small tools and consumables are required to
perform the work but not part of the final installation. Generally derived by a percentage
of the material cost.
✔✔Performance Bond - ✔✔essentially an insurance policy that the work will be
completed. The rates offered to a contractor are based on how financially
sound and capable a contractor has demonstrated themselves to be. Actual rates vary
from contractor to contractor, and from bonding company to bonding company. Care
should be taken to ascertain the bonding capacity of a contractor prior to award.
✔✔Bid Bonds - ✔✔A bond that guarantees the bidder will enter into a contract on the
basis of the bid
✔✔Payment Bond - ✔✔bond that is executed in connection with a contract and
which secures the payment of all persons supplying labor and materials in the
prosecution of the work provided for in the contract
