Law and Business Test 3

Question 1

If direct costs are $35,000 and overhead is 13% and profit is 5%, what is the selling price?

Answer 1

$42,682.93 (Bid Price = direct cost + overhead cost + profit. Subtract profit and overhead cost from the overall cost of 100% leaving direct cost of 82% or .82 which $35,000 is then divided by giving you a bid price of $42,682.93)

Question 2

If the owner makes numerous changes during the course of a job, when should the contractor bill the customer for changes?

Answer 2

After the change has been made.

Question 3

After your bid for a public works job has been accepted by the awarding authority, you recognize that you incorrectly listed one of your subcontractors. What should you do to correct your errors?

Answer 3

Notify the awarding authority and request permission to make the necessary changes due to your clerical error.

Question 4

Which of the following is considered the most effective way to avoid a problem with your customer regarding change orders during the course of construction?

Answer 4

Communicate frequently with your customer during the course of construction.

Question 5

Which is the most correct statement as to what must be included in every home improvement contract?

Answer 5

Contractor’s license number

Question 6

When must a contractor show proof of licensure?

Answer 6

In each county or city when pulling permits.

Question 7

If a client wants the house painted and carpet installed, then what license(s) is/are required for this work?

Answer 7

Painting and flooring, or general building.

Question 8

Which of the following needs a contractor’s license? a. owner-builder b. registered architect and/or engineer c. moving a mobile home d. Installation of finished products that do not become a permanent fixture to the property

Answer 8

Moving a mobile home (C21 classification deals with building moving/ demolition)

Question 9

Which of the following is not a requirement to renew your license? a. Repeat the open-book asbestos exam b. Return the renewal notice with the appropriate fees. c. Be sure your bond is current and on file with the Contractors State License Board. d.Notify the Registrar’s office of the name of your worker’s compensation insurance company if you have employees.

Answer 9

Repeating the open-book asbestos examination is not required for renewal of a license.

Question 10

A general building contractor with a B classification cannot do which of the following? a. The entire construction project from start to finish including landscaping. b. Framing c. Remodeling a house d. Remodeling which includes carpentry, drywall, and asbestos removal.

Answer 10

Remodeling which includes carpentry, drywall, and asbestos removal. (Asbestos removal requires special certification)

Question 11

How many times can you take the contractor’s license exam before your original application is voided? (Assuming that you conform to scheduling)

Answer 11

An unlimited number of times within an 18 month period.

Question 12

James wishes to qualify for more than one active license at a time. According to the Contractors’ License Law, he must own what percentage of equity for each business where he serves as the qualifying individual?

Answer 12

20%

Question 13

To whom is the Preliminary Notice not sent?

Answer 13

The subcontractor (Subcontractor usually gives the Preliminary Notice)

Question 14

Who is least affected by the Notice to Owner?

Answer 14

The lender

Question 15

If a newly hired employee does not have a Social Security Number, then what should be done?

Answer 15

The employee must apply for a Social Security Number.

Question 16

Which of the following describes and employee as opposed to an independent contractor? a. The employee is supplied tools b. The employee works for an hourly wage and is unsupervised. c. The employee has payroll taxes taken out. d. All of the above

Answer 16

All of the above

Question 17

A contractor hires two employees and offers them $12 per hour to dig ditches. At the end of the year, the contractor issues them a 1099 form, indicating the amount of money he paid them for the year. What should the contractor know?

Answer 17

That his actions are illegal because the employees are not independent contractors and the fine could cost him $100 per day per employee.

Question 18

Who is responsible for “tailgate” safety meetings?

Answer 18

The foreman

Question 19

An employee, whose regular rate is $12/hour, works 60 hours one week and 30 hours the next week. Based on a two-week payroll system, what are the gross wages due?

Answer 19

First week: 40 hours x $12/hour = $480.00 20 hours of overtime x $18/hour overtime rate = $360.00 Second week: 30 hours x $12/hour = $360 Total: $480 + $360 + $360 = $1,200.00

Question 20

A worker is not paid for his overtime. He files a complaint against his employer with EDD. If the employer finds out that the employee filed the complaint and fires the worker, then:

Answer 20

The employer will be required to reinstate the employee with full back-pay and benefits, plus pay a fine of up to $1000.

Question 21

Contractors who work in sales and use tax districts in California and purchase fixtures or materials are subject to what percentage of tax?

Answer 21

A certain percentage based on supplies used at the job site differs between tax districts.

Question 22

What should John, an employee, do if his employer requires him to work more than six consecutive days?

Answer 22

It is illegal and he should report it to the Labor Commissioner.

Question 23

If a worker was injured on the job and it is determined that the worker was under the influence of alcohol or drugs at the time of the accident, what would be the result?

Answer 23

The worker would not be covered by workers’ compensation.

Question 24

DOSH requires a contractor to obtain a permit when he constructs: a. Buildings or scaffolding more than 3 stories b. Trenches which are five feet or more deep, into which a person is required to descend. c. Demolishes any building more than 3 stories d. All of the above

Answer 24

All of the above

Question 25

How often should you, an employer, conduct routine safety inspections at a job site?

Answer 25

Once a day?

Question 26

What size companies must comply with standard safety training?

Answer 26

All businesses

Question 27

Which type of job related injury requires the employer to make a written report?

Answer 27

An injury requiring medical attention beyond first aid.

Question 28

When are you allowed to have employees work in an unsafe area?

Answer 28

If the employee is properly protected and is in the area to correct the problem.

Question 29

Cal OSHA specifies that a minimum of one toilet be provided for ______ workers at a job site.

Answer 29

Twenty workers

Question 30

An employee can learn about safety records at a company because the employer must post a summary record of job related injuries in a conspicuous place how often?

Answer 30

Once a year

Question 31

If you hired an employee to work with toxic waste and you forget to explain an important safety feature that resulted in an employee getting burned, what could happen?

Answer 31

The employee can sue the employer for negligence.

Question 32

During removal of asbestos from ceilings: a. The asbestos containing material should be thoroughly wetted. b. Protective clothing and respirator should be worn. c. Floors, walls, windows and doors should be sealed with a double layer of six-mil plastic sheeting d. All of the above

Answer 32

All of the above

Question 33

You must notify the regional Underground Service Alert Center no less than ___ day(s) before nor more than ____ starting excavation work (except in an emergency).

Answer 33

2-14 days before

Question 34

When your employees are working with hazardous materials, how and/or where the information concerning the materials should be obtained if an employee wanted the information?

Answer 34

It should be posted near the job site or should be kept by the supervisor and supplied to the employee when requested

Question 35

How could workers and employers learn if a construction substance constitutes a threat of cancer? a. By reading the “Material Data Safety Sheets” provided by suppliers of construction materials b. By obtaining a “List of Hazardous Substances” from the Department of Industrial Relations c. From DOSH or Cal/OSHA d. All of the above

Answer 35

All of the above

Question 36

If John a contractor decides to take out a loan to pay for a truck, he should obtain what type of loan?

Answer 36

Intermidiate term loan to be paid in 1-7 years.

Question 37

What is the best method of bookkeeping in a construction company?

Answer 37

Record your expenses when they occur and not when they are paid, as well as record your incomewhen you have earned it.

Question 38

Which of the following statements regarding accounting systems is correct?

a. The accrual method recognizes cash recieved but not earned, as a liability and not as income.
b. The accrual method is the easiest way to keep financial records.
c. Financial statements and management reports do not reflect current financial conditions when using the cash method.

Answer 38

Financial statements and management reports do not reflect current financial conditions when using the cash method.

Question 39

If a discrepancy emerges between debits and credits of aproximatley $8.30, what should the bookeeper do?

Answer 39

Find the error no matter how long it takes.

(The balance sheet must balance)

Question 40

For which of these expenses would it be least appropriate for a contractor to seek a short-term loan?

a. Bid deposit
b. Material cost
c. Monthly rent on office space
d. Payroll expenses

Answer 40

Monthly rent on office space

Question 41

A contractor should incorporate his chart of accounts into his….?

Answer 41

Journals and ledgers

Question 42

You want to get a loan from a bank to buy supplies for which you can pay back within 90 days. Approval of the loan depends on….?

a. A high quick ratio
b. The fact that you have short-term liquidity
c. Your ability to pay the loan back within 90 days
d. All of the above

Answer 42

All of the above

Question 43

At the end of each month data is posted from the bookkeeping journals to the….?

Answer 43

General ledger

Question 44

Which of the following is true about liabilities?

a. Liabilities are obligations to pay money or render services.
b. Liabilities can consist of accounts payable, payroll, and mortgage.
c. Liabilities can be either current or long-term
d. All of the above

Answer 44

All of the above

Question 45

Bob Jones has been contracting for about five years. Bob, who has been managing all phases of this business, is checking his financial statements to determine the condition of his company. What does an intelligent construction manager do to determine his financial position?

a. He compares the data of his company with data of other similar companies, if available.
b. He compares data for the current year with that of previous years.
c. He uses ratios to analyze financial data.
d. All of the above

Answer 45

All of the above

Question 46

Which of the following represents a current asset?

a. Accounts payable
b. Retentions
c. Accrual payroll
d. Retained earnings

Answer 46

Retentions

(Accounts payable and accrual payroll is part of the current liabilities. Retained earnings is part of the stockholder’s equity.)

Question 47

Why is net worth important on the balance sheet?

Answer 47

It represents the amount of money the owner has invested in the company as well as the profits the company has retained. It tells how much of the company’s assets belong to the owner.

Question 48

Labor costs are determined by….?

Answer 48

Gross wages, payroll taxes, health and welfare benefits, insurance, and vacation.

Question 49

Direct labor burden includes…?

Answer 49

Payroll taxes and insurance for employees.

Question 50

Direct costs are….?

Answer 50

Costs charged directly to the jobsite including labor and materials.

Question 51

An income and expense statement can also be call a….?

Answer 51

Profit and loss statement, Income statement, or P & L statement.

Question 52

The term “net worth” on a corporate balance sheet represents what?

Answer 52

The claim of the owners on the assets of the business.

Question 53

Direct labor is comprised of….?

Answer 53

Actual cost of labor payroll

Question 54

What is the best way to tell if your company is profitable or not?

Answer 54

Look at the income statement

Question 55

How often should income statements be prepared?

Answer 55

Whenever you want to view your profit or loss.

Question 56

Which of the following is a direct cost?

a. Payroll tax
b. Pens, pencils, and other office supplies
c. Office rental payment
d. Depreciation of office equipment

Answer 56

Payroll Tax