Exam 2

Question 1

Fees

Answer 1

income for the company

Question 2

Billing Rate

Answer 2

a dollar amount charged for each design professional usually expressed as an hourly rate
= salary rate of employee + overhead expenses + profit
(usually 3x salary)

Question 3

Overhead Expenses

Answer 3

expenses necessary to keep the doors open (rent, phone, copies, advert)

Question 4

Fringe Benefit

Answer 4

an extra benefit supplementing an employees salary (subsidized meals, health insurance, company car)

Question 5

Direct Personnel Expense (DPE)

Answer 5

a number that includes salary + benefits, taxes & paid holidays
Direct & overhead expenses
profit

Question 6

Billing Rates accuracy

Answer 6

by salary is simpler

by DPE is more accurate

Question 7

Indirect Job Costs

Answer 7

Overhead
Overtime
Indecisive Client
Scope Creep
Unforeseen Consultants
Unforeseen job site delivery costs

Question 8

Hourly Fee Method

Answer 8

Not to Exceed limit
based on professional level of employee
average of various levels
by kind of service rather than personnel

Question 9

Fixed Fee Method (lump sum)

Answer 9

Calculate all expenses up front, include 10-20% contingency
Not good for inexperienced designers
Typically used for large firms with a bottom line

Question 10

Contract

Answer 10

promise made between two or more parties to perform or not perform some act

Question 11

Offer

Answer 11

one party purposes to do something for another party

Question 12

Acceptance

Answer 12

The party to whom the proposal has been made agrees to accept the offer and is bound

Question 13

Contractual Capacity

Answer 13

each party to the contract must have the legal ability to enter into the contract

Question 14

Consideration

Answer 14

something of value that is exchanged as it relates to the contract

Question 15

Mutual Assent

Answer 15

the giving of the offer and acceptance of the offer must be done willingly

Question 16

Legality

Answer 16

the contract must exist only to support the performance of some legal act

Question 17

Performance

Answer 17

the completion of the acts called for in a contract

Question 18

Breach of Contract

Answer 18

occurs when one of the parties of the contract does not perform his/her duties

Question 19

Letter of Agreement

Answer 19

a contract that is generally less formal in content and terminology and looks more like a letter
same legal considerations as a contract

Question 20

Net Pricing

Answer 20

50% reduction from the suggested retail price

Question 21

Wholesale Pricing

Answer 21

Net and Wholesale- a special price given to a designer by a supplier, which is lower than what it would cost the consumer

Question 22

Cost Price

Answer 22

The price the designer must pay for the goods

Question 23

Selling Price

Answer 23

The actual price at which designers sell the goods to the client

Question 24

Retail Price

Answer 24

The price at which goods and services are sold to the consumer

Question 25

MSRP

Answer 25

Manufacturer Suggested Retail Price (List Price)

Question 26

Discount

Answer 26

a reduction, usually a percentage, from the suggested retail price

Question 27

Full Discount Price

Answer 27

50% of the suggested retail (net price)

Question 28

Markup

Answer 28

a percentage amount that is added to the cost of goods to get the selling price Standard market is 100% from net price

Question 29

Deposit

Answer 29

prepaid by the buyer for security

Question 30

Down Payment

Answer 30

a portion of the total selling price paid at the time something is ordered

Question 31

Retainer

Answer 31

is a payment to a professional to cover future services or advice by that professional

Question 32

The UCC

Answer 32

Uniform Commercial Code is a uniform set of laws concerning the sale of goods

Question 33

Buyers Rights

Answer 33

Buyer has the right to inspect the goods before paying for them