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AACE CCT PRIMER EXAM AND
PRACTICE EXAM NEWEST 2025
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Items that can affect purchase cost of materials - CORRECT ANSWER>>a. market pricing (pre-negotiated vs. competitively bid, etc.) b. order quantity c. taxes and duties d. carrying charges e. cancellation charges f. demurrage g. hazardous material regulations h. warranties, maintenance and service Items that can affect the management cost of materials - CORRECT ANSWER>>a. delivery schedule b. packing c. shipping and freight d. freight forwarding e. handling f. storage and inventory g. agent cost h. surveillance or inspection i. expediting j. losses (shrinkage, waste, theft, damage) k. spare parts (inventory or start-up) l. surplus materials Advantages of leasing capital equipment over renting - CORRECT ANSWER>>Minimal upfront cash outlay
Not a loan so it does not tie up your line of credit Maintenance agreement, service by others Possible tax advantage as the lease is an expense and may be able to reduce overall tax liability May include a purchase option Advantages of renting capital equipment - CORRECT ANSWER>>Keep work progressing when there is an equipment breakdown Meet specialty job requirements Very efficient for low-percentage utilization Short-term peak or seasonal use Considered to evaluate equipment for purchase Fill in for equipment being repaired Can be returned at any time, not a guaranteed amount of time Maintenance is usually handled by dealer or rental yard Can conserve company capital Can have an option to buy clause Types of Valuation - CORRECT ANSWER>>Reproduction, Replacement Costs, Fair Value, Market Value, Book Value, Residual/Economic Value, Operating Cost Reproduction Costs - CORRECT ANSWER>>The cost of reproducing substantially the identical item or facility at a price level as of the date specified Replacement Costs - CORRECT ANSWER>>Is the cost new of an item having the same or similar utility [S&K 5th Ed., 6.1]. Fair Value - CORRECT ANSWER>>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].
Scrap Value - CORRECT ANSWER>>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) - CORRECT ANSWER>>(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 - CORRECT ANSWER>>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 - CORRECT ANSWER>>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 The sum of the practices and processes that an enterprise uses to manage the total life cycle cost investment in its portfolio of strategic assets is called _________ - CORRECT ANSWER>>Total Cost Management ______ is the application of scientific principles and techniques to problems of :
- estimation
- cost control
- business planning & management science
- profitability analysis
- project management
- planning & scheduling - CORRECT ANSWER>>Cost Engineering
_______ Is the value of an activity or asset. Generally, this value is determined by the cost of the resources that are expended to complete the activity or produce the asset. An example would be the facilities needed to produce an activity or asset, which would include the tooling, electricity, taxes, and maintenance, etc., necessary to keep the facility available for use. Other costs might be office supplies, communication costs, travel costs, and security costs - CORRECT ANSWER>>Cost Any consumable, except time, required to accomplish an activity are considered _______. From a total cost and asset management perspective, _______ may include any real or potential investment in strategic assets including time, monetary, human, and physical. - CORRECT ANSWER>>Resources, Resources A resource becomes a cost when it is ______ or consumed in an _____or project - CORRECT ANSWER>>invested, project Material, labor, and "other" are categories of _________. - CORRECT ANSWER>>Resources The product lifecycle is the complete history of a product through its ______, definition, production, operation, and obsolescence /______ phases. - CORRECT ANSWER>>concept, disposal The distinction between product life cycle and project life cycle is that the latter does not include the ______ and ______. - CORRECT ANSWER>>operation, disposal ___________ is the systematic numeric method of classifying various categories of costs for accounting purposes - CORRECT ANSWER>>Code of Accounts ______ is used used in situations where each job is different and is performed to the customer's specifications. ______ involves keeping an
Roles such as executive/senior management, legal, HR, business development, etc. These roles are the farthest removed from the actual production of discrete product at the various facilities. They are shared across many production locations and considered ______. - CORRECT ANSWER>>overhead ______ are field/plant support personnel, located at the site. These resources help the operation run smoothly. These are people like local payroll, facility maintenance, site project controls, site senior (office-based) supervisors and management who are shared across the various products the particular location produces. - CORRECT ANSWER>>Indirects _______are the remote location people directly involved in producing the product. These are the easiest to correlate their effort to a particular product. First line supervisors are also normally considered ______. - CORRECT ANSWER>>Directs The owner approaches cost from a _____ point of view. Owners not only consider the cost of the construction, or process, but ______ supervision and overhead, implementation costs, cost of money, furniture, fixtures, equipment( FFE) and other considerations - CORRECT ANSWER>>holistic, internal Contractors, subcontractors, suppliers only consider their part of the _______ and are responsible for that alone. - CORRECT ANSWER>>Project costs Appraising or estimating the worth of something having economic or monetary value is the general description of ________. - CORRECT ANSWER>>valuation Valuation in _______ is the determination of the worth of the asset or that which has been damaged or lost - CORRECT ANSWER>>insurance, insured Valuation in ________ is the determination of the dutiable value of imports by the customs authorities. - CORRECT ANSWER>>International Trade
A(n) _________ represents the foregone benefit by choosing one alternative over another - CORRECT ANSWER>>Opportunity cost There is a relationship between time and the opportunity to influence a projects cost. The more time that has elapsed, the ____ the chance to alter the cost. It is important to make the cost effective decisions ______ in a project or process to have the most influence on cost. - CORRECT ANSWER>>less, early ________focuses on external reporting. Maintain the balance sheet (assets and liabilities) and generate income (revenues less expenses) and tax statements for the organization _________. Only look at indirects costs as a whole, not broken out to individual products or departments. - CORRECT ANSWER>>Managerial Accounting, as a whole In cost accounting the focus is on ___________, and their product is often proprietary. Determine how much it is costing the organization to produce a particular product. Looks at appropriate allocation of overhead and indirect costs to only include those ______ to the product. - CORRECT ANSWER>>internal reporting, directly applicable Impact of "One Size Fits All" Allocation - CORRECT ANSWER>>Easy to come up with and ensure 100% allocation of the overhead costs, usually don't reflect what is truly needed to produce that organizational deliverable. In the "one size fits all" approach, overhead and indirect costs and forced DOWN onto the product. Activity Based Costing - CORRECT ANSWER>>A production process is broken down into ACTIVITIES. Typical nomenclature is an "action verb- adjective-noun" grammar convention(inspect defective products, open new customer accounts). Operating Costs - CORRECT ANSWER>>Expenses incurred during the normal operation of a facility including labor, materials, utilities, and other
Variable Cost - CORRECT ANSWER>>costs that are a function of production, e.g., raw materials costs, by-product credits, and those processing costs that vary with plant output (such as raw materials, utilities, catalysts and chemical, packaging, and labor for batch operations) Unit Cost - CORRECT ANSWER>>= [(fixed costs) + (qty * variable cost)] / (qty) Incremental (or marginal) Cost - CORRECT ANSWER>>How much the total cost increases if you increase production by one more unit. As the fixed costs have been recouped in the original production run pricing, the incremental cost is usually just the variable cost. Order-specific costing technique - CORRECT ANSWER>>used in situations where each job is different and is performed to the customer's specifications. Job costing involves keeping an account of direct costs (labor, machine time, raw materials) and indirect costs (overheads) Material Types - CORRECT ANSWER>>Raw, Bulk, Fabricated, Engineered, Consumables Materials - Raw - CORRECT ANSWER>>Raw materials are those materials used in a production or fabrication process that require a minimum amount of processing to be useful [S&K 5th Ed., 3.2]. Materials - Bulk - CORRECT ANSWER>>Material bought in lots. These items can be purchased from a standard catalog description and are bought in quantity for distribution as required. Examples are pipe, conduit, fittings and wire [RP 10S-90]. Materials - Fabricated - CORRECT ANSWER>>Fabricated materials are bulk materials transformed into custom-fit items for a particular product or project [S&K 5th Ed., 3.3].
Materials - Engineered or Designed - CORRECT ANSWER>>Engineered or designed materials constitute a category requiring substantial working in order to attain their final form. Design or engineered materials are also based on shop drawings [S&K 5th Ed., 3.3]. Materials - Consumables - CORRECT ANSWER>>Supplies and materials used up during construction. Includes utilities, fuels and lubricants, welding supplies, worker's supplies, medical supplies, etc. functioning. Operating costs may also include general building maintenance, cleaning services, taxes, and similar items [RP10S-90]. Temporary Equipment: - CORRECT ANSWER>>expensed items for construction, maintenance, etc) Labor Burden - CORRECT ANSWER>>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 - CORRECT ANSWER>>Gross direct wages paid to the worker Burdened Labor - CORRECT ANSWER>>Gross direct wages paid to the worker, plus labor burden All in Labor - CORRECT ANSWER>>Gross direct wages paid to the worker, plus labor burden, plus field indirects, plus general & administrative costs, plus profit [RP10S-90]. Exempt Employees - CORRECT ANSWER>>Employees exempt from overtime compensation by federal wage and hours guidelines [RP10S-90]. Non-Exempt Employees - CORRECT ANSWER>>Employees not exempt from overtime compensation by US federal wage
bonding company. Care should be taken to ascertain the bonding capacity of a contractor prior to award. Bid Bonds - CORRECT ANSWER>>A bond that guarantees the bidder will enter into a contract on the basis of the bid Payment Bond - CORRECT ANSWER>>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 Retention (Retainage) - CORRECT ANSWER>>Usually refers to a percent of contract value retained by the purchaser until work is finished and testing of equipment is satisfactorily completed Liquidated Damages - CORRECT ANSWER>>An amount of money stated in the contract as being the liability of a contractor for failure to complete the work by the designated time(s). Liquidated damages ordinarily stop at the point of substantial completion of the project or beneficial occupancy by the owner. Also can apply to contract defined output performance Escalation - CORRECT ANSWER>>The provision in actual or estimated costs for an increase in the cost of equipment, material, labor, etc., over that specified in the purchase order or contract due to continuing price level changes over time. Inflation may be a component of escalation, but non-monetary policy influences, such as supplyand-demanded, are often components Inflation - CORRECT ANSWER>>Inflation is a rise in the price level of a good or service or market basket of goods and/or services. Inflation does not occur by itself but must have a driving force behind it. Driving forces of Inflation - CORRECT ANSWER>>1) Money Supply - is influenced by the central bank of a country.
- Exchange Rate - can impact inflation by influencing the price of imported goods and services.
- Demand-Pull Inflation - is when excessive quantities of money are chasing a limited amount of goods and services resulting in what is essentially a "seller's market" as sellers receive premium prices.
- Cost-Push Inflation - takes place when product producers encounter higher costs and then push these costs along to others in the production chain through higher prices. These higher costs may be for labor, material, or any other item with a significant cost element [S&K 5th Ed., 7.2]. Contingency - CORRECT ANSWER>>An amount added to an estimate to allow for items, conditions, or events for which the state, occurrence, or effect is uncertain and that experience shows will likely result, in aggregate, in adding costs. Typically estimated using statistical analysis or judgment based on past asset or project experience. Contingency usually excludes:
- Major scope changes such as changes in end product specification, capacities, building sizes, and location of the asset or project;
- Extraordinary events such as major strikes and natural disasters;
- Management reserves; and
- Escalation and currency effects. Allowance - CORRECT ANSWER>>Resources included in estimates to cover the cost of known but undefined requirements for an individual activity, work item, account or sub-account. Allowances are often included in the estimate as a percentage of some detailed cost component. Some typical examples of allowances that may be included in a detailed construction estimate are: Design allowance for engineering equipment Material take-off allowance Overbuy allowance Unrecoverable shipping damage allowance Allowance for undefined major items
comparable benchmark jobs in the labor market Market Penetration Pricing - CORRECT ANSWER>>Strategy adopted for quick achieving a high volume of sales and deep market-penetration of a new product. Under this approach, a product is widely promoted and its introductory-price is kept comparatively lower. This strategy is based on the assumption that (1) the product does not have an identifiable price-market segment, (2) it has elasticity of demand (buyers are price sensitive), (3) the market is large enough to sustain relatively low profit margins, and (4) the competitors too will soon lower their prices Demand-Oriented Pricing - CORRECT ANSWER>>Method in which price of a product is changed according to its demand higher price when the demand is strong, lower price when it is weak Predatory Pricing - CORRECT ANSWER>>Practice of temporarily selling below survival prices or giving goods away to undermine or eliminate the existing competition. Predatory pricing is an abuse of dominant position, and is illegal in several countries At Cost Pricing - CORRECT ANSWER>>In slow construction cycles, contractors often price jobs at or just below cost to keep their workforce employed and active in the market. However, contracts awarded in this case often suffer from extensive change order requests to make the project profitable. Cost Estimate - CORRECT ANSWER>>cost estimate is defined as "a compilation of all the costs of the elements of a project or effort included within an agreed upon scope." To a contractor, this is the cost that will most likely be incurred in completing the project as defined in the contract documents. The contractor's cost includes its own internal costs, as well as those of its subcontractors, suppliers, and third parties [S&K 4th Ed., 1-1]. Basic Steps of Estimating - CORRECT ANSWER>>Take Off, Costing, Pricing
Take-Off - CORRECT ANSWER>>Measuring and cataloging the quantities of work derived from the scope documents [S&K 4th Ed., 1-1]. Costing (estimating) - CORRECT ANSWER>>Using the take-off and the information presented in the scope documents to assign cost values to the elements of work previously cataloged [S&K 4th Ed., 1-1]. Pricing (estimating) - CORRECT ANSWER>>Determining the amount to be charged to the owner/client so as to fully include direct and indirect cost items, as well as contingency and profit [S&K 4th Ed., 1-1]. Addendum (Addenda) - CORRECT ANSWER>>A written change or graphic instrument issued before the date bids are opened. An addendum may interpret or modify the bidding documents by making additions, deletions, clarifications, or corrections [S&K 4th Ed., 1- 1 Allowances - CORRECT ANSWER>>Additional resources included in estimates to cover the cost of known but undefined requirements for an individual activity, work item, account, or subaccount [S&K 4th Ed., 1-1; Alternate - CORRECT ANSWER>>A request from the owner for the cost of adding or deleting an item or work element from the basic bid. The cost of adding an item is usually known as an additive alternate, while the cost of deleting an item is known as a deductive alternate Bid Documents - CORRECT ANSWER>>The advertisement for bids, instructions to bidders, information available to bidders, bid form with all attachments, and proposed contract documents (including all addenda issued before the receipt of bids) Change Order - CORRECT ANSWER>>A document requesting a change or correction; a written change made by the architect / engineer to the
Value Engineering - CORRECT ANSWER>>A practice function that is targeted at the design itself. The objective of value engineering is to develop or design a facility or item that will yield the least lifecycle costs or provide the greatest value while satisfying all performance and other criteria established for it [S&K 4th Ed.]. Types of Estimates - CORRECT ANSWER>>Order of Magnitude, Budget Estimates, Definitive Estimates Order of Magnitude Estimates - CORRECT ANSWER>>Estimates made without detailed engineering data. An estimate of this type would normally be expected to be accurate within +50 percent or - 30 percent. Order-of-magnitude estimates are sometimes referred to as "conceptual" or "ballpark" estimates. Budget Estimates - CORRECT ANSWER>>Budget estimates are prepared with the help of flow sheets, layouts, and equipment details. In other words, enough preliminary engineering has taken place to further define the project scope. An estimate of this type is normally expected to be accurate within +30 percent or - 15 percent. Since the budget estimate is more definitive than the order-of-magnitude estimate, it is better suited for determining project feasibility and establishing definitive budget. The accuracy and usefulness of a budget estimate depends, to a large extent, on the amount and quality of information available [S&K 4th Ed., 1-5]. Definitive Estimates - CORRECT ANSWER>>estimates prepared from very defined engineering data. The definitive estimate includes various degrees of detail estimates which could be made from "approved for construction" drawings and specifications. Definitive estimates are also called "check" lump sum, "tender," and "post-contract change estimates. An estimate of this type is usually expected to be accurate within +15 percent or - 5 percent [S&K 4th Ed., 1-5]. Class 5 Estimate - CORRECT ANSWER>>0% to 2% Level of Project Definition; Screening End Usage
Class 4 Estimate - CORRECT ANSWER>>1% to 15% Level of Project Definition; Concept Study End Usage Class 3 Estimate - CORRECT ANSWER>>10% to 40% Level of Project Definition; Budget End Usage Class 2 Estimate - CORRECT ANSWER>>30% to 70% Level of Project Definition; Control or Bid End Usage Class 1 Estimate - CORRECT ANSWER>>50% to 100% Level of Project Definition; Check or Bid End Usage Basis of Estimate - CORRECT ANSWER>>Document that supports the estimate. States the purpose of the estimate (i.e. cost study, project options, funding, etc), who developed it, project scope, pricing basis, allowances, assumptions, exclusions, cost risks & opportunities, & deviations from standard practices ______ costs, ________ costs, ________ costs, ______ costs are all considered direct costs in an estimate. - CORRECT ANSWER>>labor, material, equipment, subcontract Indirect costs in an estimate include ______, ______, ______, home office ______, job site _______, and _______. - CORRECT ANSWER>>taxes, profit, contingency, overhead, overhead, escalation The following are all considered ____________: a) Salaries (home office) b) Employee benefits c) Professional fees d) Insurance e) Office lease or rent f) Office stationary and supplies g) Depreciation h) Maintenance
