REAL EXAM QUESTIONS AND CORRECT

REAL EXAM QUESTIONS AND CORRECT

VERIFIED ANSWERS / AFSB 152 THE

INSTITUTES PRACTICE REAL EXAM

LATEST VERSION (NEW!!)

One of the parts of an analysis that underwriter Joe Muller is assessing for Rayfield Construction (RC) is its backlog to help the surety make a decision on further bonding opportunities with this contractor. Joe is reviewing RC's backlog to working capital ratio. He notes that the calculation used a backlog amount of $6,000,000 and working capital of $400,000. If Joe wants to use these same figures but express the information in terms of working capital as a percentage of backlog instead, what will be Joe's calculated percentage rounded up to the nearest whole number?

• 20%
• 13%
• 7%

- 5% - ANSWER-7%

400,000 / 6,000,000 = 6.66 = 7%

Ewing General Contracting (EGC) entered a contract to complete a major renovation for Ralph's Restaurant. Because Ralph's is located in a tourist town, it was important that the construction work be completed by May 1. The construction contract included a provision that stated that if the job was not completed by May 1, EGC would be assessed $500 a day for each day of delay in completing the project. These damages to be paid by EGC are known as

• Direct damages. 1 / 4

• Consequential damages.
• Liquidated damages.
• Actual damages. - ANSWER-Liquidated damages.

The costliest method of contract dispute resolution is typically

• Contract termination.
• Mediation.
• Arbitration.
• Litigation. - ANSWER-Litigation.

A proprietor of a sole proprietorship is

• Entitled to all the profits and responsible for a portion of liabilities.
• Entitled to all the profits and is not responsible for any liability.
• Entitled to a portion of the profits and responsible for all liabilities.
• Entitled to all the profits and responsible for all liabilities. - ANSWER-Entitled to

all the profits and responsible for all liabilities.

Due to the scope of the project, Cortland Company and May Contracting agreed to a cost-plus construction contract. Which one of the following accurately describes a cost-plus construction contract?

• A cost-plus contract includes cost of work and a fee for overhead and profit.
• A cost-plus contract is a fixed-price contract with a changes clause.
• A cost-plus contract includes costs of materials plus labor costs.
• A cost-plus contract includes work costs agreed to in advance plus cost overruns.
• ANSWER-A cost-plus contract includes cost of work and a fee for overhead and

profit.

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Which one of the following correctly describes the right of an owner or a contractor to terminate a contract?

• An owner or a contractor can terminate a contract at any time for any reasonable

cause.

• Without a termination clause, an owner or a contractor can terminate a contract

only for a material breach of contract.

• Without a termination clause, an owner can terminate a contract, but a contractor

cannot.

• Without a termination clause, an owner or a contractor cannot terminate a

contract for any reason. - ANSWER-Without a termination clause, an owner or a contractor can terminate a contract only for a material breach of contract.

A limited liability company is most similar to a:

• Subchapter S corporation.
• Subchapter C corporation.
• Joint venture.

- General partnership. - ANSWER-Subchapter S corporation:

• Tax liability is passed through to the individual members similar to the way tax

liability is passed to shareholders in S Corps.

Lansing Construction Company completed major jobs including road grading, bridges, and base and paving work. Which one of the following types of contractors is Lansing?· Heavy and highway construction · General Engineering contractor · General Building contractor · Design/build contractor - ANSWER-Heavy and highway construction

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The project owner for a new shopping plaza being built in Highville is the Highville Municipal Property Company. The role of the project owner at the beginning of any construction project is to · Engage consultants in fields in which it lacks the expertise necessary for the project · Define a need for a facility and engage an architect or an engineer · Furnish an estimated project cost that may be used to negotiate financing for the project · Design the facility and prepare the plans and specifications for its construction - ANSWER-Define a need for a facility and engage an architect or an engineer

In construction contracts, the critical path method · Ensures that, during mobilization, the crew moves big equipment from one location to another following the shortest route, in terms of mileage · Ensures that, during mobilization, the crew moves big equipment from one location to another on less-used roads and during times when traffic is minimal · Ensures that work is completed in a logical sequence and that the project is completed within the time budget specified in the contract terms · Ensures that all minor finishing tasks, identified in a punch list, are completed before the project reaches substantial completion - ANSWER-Ensures that work is completed in a logical sequence and that the project is completed within the time budget specified in the contract terms

The party that directly benefits from the additional security of knowing that the contractor has satisfied the surety's comprehensive prequalification review is the · Suppliers · Laborers · Project Owners · Architect or engineer - ANSWER-Project Owners

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