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AACE CCT practice questions

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Question 1Cost Estimating

Under the AACE International estimate classification system, which class of estimate is prepared with the least project definition and therefore carries the widest expected accuracy range?

  1. Class 1
  2. Class 5 Correct answer.
  3. Class 3
  4. Class 2

Explanation

Estimate classes run from Class 5 (least defined, typically 0%-2% of definitive engineering complete) to Class 1 (most definitive). Class 5 is the order-of-magnitude estimate and carries the widest accuracy range, commonly of the order of -30% to +50% or wider. Accuracy narrows as project definition matures toward Class 1.

Question 2Cost Estimating

An estimator measures 4,800 m2 of formwork from the drawings and applies a unit rate of $22/m2. What is the estimated direct cost of the formwork?

  1. $110,400
  2. $96,000
  3. $105,600 Correct answer.
  4. $211,200

Explanation

Priced cost equals measured quantity multiplied by the unit rate: 4,800 m2 x $22/m2 = $105,600. The unit rate already expresses cost for a single unit of the measured item, so no further adjustment is required.

Question 3Cost Estimating

In a project cost estimate, contingency is best described as:

  1. A reserve held for scope changes after contract award
  2. An allowance covering only material price escalation
  3. A reserve for uncertainty within the defined project scope Correct answer.
  4. A contractor's fee covering profit and home office overhead

Explanation

Contingency is money included in the estimate to cover uncertainty inside the defined scope, both identified items not yet quantified and unidentified risks. It is part of the project estimate rather than a markup for profit or a fund for new scope. Escalation is treated as a separate, distinct allowance.

Question 4Cost Estimating

Labor burden in a construction estimate typically consists of:

  1. Base wages paid directly to the craft worker
  2. Waste and spoilage of construction materials
  3. The operating cost of the contractor's equipment
  4. Fringe benefits, payroll taxes and insurance Correct answer.

Explanation

Burden is everything a contractor pays on top of the base hourly wage, such as statutory payroll taxes, workers' compensation and general liability insurance, and negotiated fringe benefits. It is normally expressed as a percentage of base wages or as an hourly add-on. Equipment costs and material waste belong to different cost categories.

Question 5Cost Estimating

Parametric estimating develops a cost estimate by:

  1. Obtaining a consensus of expert opinion through structured interviews
  2. Summing detailed quantities times unit rates for every work item
  3. Extrapolating from the apparent low bid on a similar project
  4. Deriving cost from statistical relationships with design parameters Correct answer.

Explanation

Parametric estimating uses cost estimating relationships that statistically link cost to measurable design or physical parameters such as capacity, floor area or power output. It requires far less design detail than a quantity-based build-up and is typically used early in project development.

Question 6Cost Estimating

Escalation included in a cost estimate is intended to account for:

  1. Errors made in the quantity takeoff and pricing
  2. Changes in prices and wages over time Correct answer.
  3. Site conditions that reduce craft productivity
  4. Currency conversion at the time of payment

Explanation

Escalation reflects the change in the purchasing power of money between the estimate basis date and the date the cost will actually be incurred. It is computed from indices or published inflation rates and applied separately from contingency. Quantity error and productivity loss are estimating or risk issues, not escalation.

Question 7Cost Estimating

In cost estimating, a unit rate is:

  1. The cost of one unit of a measured item Correct answer.
  2. The total cost of a work package divided by the number of trades
  3. The sum of direct and indirect costs for a project
  4. The hourly charge-out rate for construction equipment

Explanation

A unit rate expresses the cost of a single unit of a measured item, such as dollars per cubic metre of concrete or per square metre of formwork. Multiplying the unit rate by the measured quantity gives the cost of that item. It is a building block of detailed estimates, not a project-level total.

Question 8Cost Estimating

The main purpose of a work breakdown structure in cost estimating is to:

  1. Break scope into elements for estimating and control Correct answer.
  2. Establish the contract payment terms with the owner
  3. Assign responsibility for safety on the construction site
  4. Define the logic linking project schedule activities

Explanation

A work breakdown structure decomposes the total project scope into progressively smaller, manageable elements so that quantities and costs can be estimated, rolled up and later controlled. Each element becomes a node for coding cost data and monitoring performance. Schedule logic, safety responsibility and payment terms are managed through other project tools.

Question 9Cost Estimating

A published equipment cost index stood at 320 when a plant was built and stands at 400 today. A piece of equipment cost $250,000 at the time of construction. Using the index alone, what is the escalated cost today?

  1. $312,500 Correct answer.
  2. $280,000
  3. $330,000
  4. $200,000

Explanation

The index method scales historical cost by the ratio of the current index to the historical index: $250,000 x (400/320) = $312,500. The ratio reflects the relative change in price level between the two dates.

Question 10Cost Estimating

A 100-tonne capacity unit costs $500,000. Using a capacity factor exponent of 0.6, what is the estimated cost of a similar 200-tonne capacity unit?

  1. $606,000
  2. $758,000 Correct answer.
  3. $650,000
  4. $1,000,000

Explanation

Capacity factoring scales cost by the capacity ratio raised to an exponent: $500,000 x (200/100)^0.6 = $500,000 x 1.516 = $758,000. Because the exponent is below 1, cost rises more slowly than capacity.

Question 11Cost Estimating

A project estimated at $4.0 million in the base city is to be built in a location whose location factor is 1.15 relative to that city. What is the adjusted estimate, all else being equal?

  1. $5.40 million
  2. $3.48 million
  3. $4.60 million Correct answer.
  4. $4.15 million

Explanation

Location factors adjust a base-location estimate for local differences in labor, materials and productivity: $4.0 million x 1.15 = $4.60 million. The factor is a multiplier applied to the base-location cost.

Question 12Cost Estimating

The Lang factor method is used to estimate:

  1. Owner's contingency derived from the contractor's fee amount
  2. Escalation of total plant cost from a published cost index
  3. Total plant cost as a multiple of delivered equipment cost Correct answer.
  4. Labor cost derived from the cost of installed bulk materials

Explanation

Lang factors estimate the total installed cost of a process plant by multiplying the delivered equipment cost by a factor that depends on whether the plant is predominantly solids, fluids or a mixed process. They are a quick capacity-based screening method used before detailed engineering exists.

Question 13Cost Estimating

A crew takes 100 hours on the first unit of a repetitive operation that follows an 80% learning curve. Approximately how many hours will the fourth unit take?

  1. 51 hours
  2. 64 hours Correct answer.
  3. 40 hours
  4. 80 hours

Explanation

On a learning curve, unit cost falls by the curve percentage each time cumulative quantity doubles. The fourth unit is two doublings from the first, so 100 x 0.8 x 0.8 = 64 hours.

Question 14Cost Estimating

Which statement best distinguishes a bottom-up estimate from a top-down estimate?

  1. It builds from detail and is more accurate but costlier Correct answer.
  2. It is prepared from the top of the WBS downward without quantities
  3. It gives the same result as top-down when the same index is used
  4. It requires no quantity takeoff and is used before design starts

Explanation

A bottom-up estimate assembles cost from detailed quantities and rates for each work item, which generally improves accuracy but requires more design information and estimating effort. Top-down methods work from project-level parameters and are faster but less precise.

Question 15Cost Estimating

An owner needs an estimate to authorize full funding and establish a control baseline for a project whose engineering is roughly 40% complete. Which AACE estimate class is most appropriate?

  1. Class 3 Correct answer.
  2. Class 5
  3. Class 4
  4. Class 1

Explanation

Class 3 estimates are typically prepared at about 10%-40% project definition and are the class normally used for budget authorization and control. Class 5 and Class 4 precede that decision, and Class 1 requires near-complete design.

Question 16Cost Estimating

Which of the following is normally classified as an indirect cost in a construction estimate?

  1. Craft labor erecting the structural steel frame
  2. Structural steel supplied and delivered by a fabricator
  3. Site supervision and temporary site facilities Correct answer.
  4. Ready-mix concrete placed in the foundations

Explanation

Indirect costs are those that support the work as a whole rather than being traceable to a specific installed item, such as site supervision, temporary facilities, and site utilities. Permanent materials and the craft labor installing them are direct costs of the work items.

Question 17Cost Estimating

Crew productivity is expected to fall by 15% because of congested site conditions. If the base labor cost for the work is $200,000, what is the adjusted labor cost?

  1. $170,000
  2. $235,000 Correct answer.
  3. $215,000
  4. $230,000

Explanation

A productivity loss means more hours are needed for the same work, so cost rises by dividing by the remaining efficiency: $200,000 / 0.85 = $235,294, or about $235,000. Adding 15% of the base cost to the base cost would understate the effect.

Question 18Cost Estimating

How does an allowance differ from contingency in an estimate?

  1. An allowance prices a known item; contingency covers general uncertainty Correct answer.
  2. Contingency appears only in Class 5 estimates and allowances only in Class 1
  3. They are two names for the same reserve carried in the estimate
  4. An allowance is a profit markup and contingency is an overhead markup

Explanation

An allowance assigns a provisional value to a specific, known cost item whose final quantity or price is not yet fixed, such as an allowance for landscaping or Owner-furnished equipment. Contingency is the broader reserve for uncertainty across the whole estimate and is not tied to one identified line item.

Question 19Cost Estimating

Range estimating using Monte Carlo simulation produces:

  1. A probability distribution of total project cost Correct answer.
  2. A logic diagram linking cost and schedule activities
  3. A contingency percentage fixed by company policy
  4. A single deterministic value for total installed cost

Explanation

Monte Carlo simulation samples repeatedly from the low, most likely and high ranges assigned to individual cost items to build a probability distribution of total cost. The distribution supports selection of a contingency corresponding to a chosen confidence level.

Question 20Cost Estimating

A contractor's estimate totals $1,000,000 direct cost, $120,000 indirect cost and $50,000 contingency. Profit of 8% is applied to total estimated cost. What is the bid price?

  1. $1,080,000
  2. $1,263,600 Correct answer.
  3. $1,209,600
  4. $1,170,000

Explanation

Total estimated cost is $1,000,000 + $120,000 + $50,000 = $1,170,000. Applying 8% profit to that total gives $1,170,000 x 1.08 = $1,263,600. The base to which profit is applied must match the stated commercial policy.

Question 21Cost Estimating

A program requires 8 identical units. The first unit costs $50,000 and the operation follows an 85% cumulative average learning curve. What is the average cost per unit for the 8 units?

  1. $36,100
  2. $42,500
  3. $30,700 Correct answer.
  4. $25,000

Explanation

With a cumulative average curve, the average cost is reduced by the curve percentage at each doubling of quantity. Eight units represent three doublings, so $50,000 x 0.85 x 0.85 x 0.85 = about $30,700 per unit.

Question 22Cost Estimating

A cost of $1,200,000 is stated at today's prices. Expenditure is spread evenly over two years beginning one year from today, and escalation is 5% per year. Using mid-period convention, what escalation amount should be added?

  1. $123,400 Correct answer.
  2. $126,000
  3. $60,000
  4. $120,000

Explanation

Each year's $600,000 is escalated from its mid-point: $600,000 x 1.05^1.5 plus $600,000 x 1.05^2.5 equals about $1,323,400 in total. The escalation to add is therefore about $123,400, which exceeds a simple two-year 10% addition because compounding applies.

Question 23Cost Estimating

A plant built in 2012 cost $30 million when the cost index stood at 240 (base 2005 = 100); the current value of the same index is 300. A new plant will be 1.5 times the capacity, and a capacity factor exponent of 0.65 applies. What is the estimated cost of the new plant?

  1. $48.8 million Correct answer.
  2. $37.5 million
  3. $56.3 million
  4. $43.9 million

Explanation

Two adjustments are applied multiplicatively: the capacity ratio raised to the exponent and the index ratio. $30 million x 1.5^0.65 x (300/240) = $30 million x 1.302 x 1.25 = about $48.8 million.

Question 24Cost Estimating

Historical bid data from three projects differ in scope, location and date. Before using them as a basis for a new estimate, the estimator should first:

  1. Average the three bids without adjustment to remove bias
  2. Use the lowest bid as it reflects efficient market pricing
  3. Normalize the data for scope, location and timing Correct answer.
  4. Apply the new project's contingency to each historical bid

Explanation

Historical cost data must be made comparable to the new project before use: scope must be aligned, location adjusted with location factors, and time adjusted with escalation indices. Only normalized data can support a valid comparison or a cost estimating relationship.

Question 25Cost Estimating

When developing a cost estimating relationship from historical project data, which practice most improves its reliability?

  1. Maximizing the number of variables in the regression
  2. Assuming it applies to all project sizes without limits
  3. Using only the single most recent project as the source
  4. Validating the fit against data not used to derive it Correct answer.

Explanation

A cost estimating relationship should be statistically tested and then validated against a data set independent of the one used to derive it. This checks predictive power and reveals over-fitting, and the relationship should carry a stated range of applicability.

Question 26Cost Estimating

In a construction cost estimate, labor burden normally consists of:

  1. the delivered price of permanent materials
  2. the base hourly wage paid to craft workers
  3. the depreciation of major construction equipment
  4. payroll taxes and fringe benefits Correct answer.

Explanation

Labor burden covers employer costs added to the base wage, such as payroll taxes, insurance, and fringe benefits. These costs are not part of the craft worker's direct hourly wage.

Question 27Cost Estimating

In equipment cost estimating, which item is classified as an operating cost?

  1. Depreciation of the equipment
  2. Cost of capital invested in the equipment
  3. Property taxes on the equipment
  4. Fuel, lubricants and repair parts Correct answer.

Explanation

Operating costs are incurred only when equipment is used and include fuel, lubricants, repairs and tires. Ownership costs such as depreciation, cost of capital and property taxes accrue whether or not the machine works.

Question 28Cost Estimating

A quantity takeoff in cost estimating is best described as:

  1. a priced schedule of contract payments
  2. a forecast of cumulative project cash flow
  3. a summary of bidder qualifications
  4. a measured list of work items and their quantities Correct answer.

Explanation

The takeoff measures the quantities of work from drawings and specifications before pricing is applied. It forms the quantity basis for a detailed estimate.

Question 29Cost Estimating

An AACE International Class 5 estimate is normally prepared with an expected accuracy range of:

  1. -5% to +10%
  2. -50% to +100% Correct answer.
  3. -20% to +30%
  4. -15% to +20%

Explanation

Class 5 is the least-defined estimate class, often based on little more than capacity or concept, and its expected accuracy is commonly stated as -50% to +100%. Accuracy tightens as project definition advances through Classes 4 to 1.

Question 30Cost Estimating

Management reserve differs from contingency because management reserve is:

  1. included in the base estimate for known unknowns
  2. calculated as a percentage of contractor profit
  3. used only to cover published cost escalation
  4. held outside the project budget for unforeseen business risks Correct answer.

Explanation

Contingency is part of the project budget and covers identified risks and uncertainties within scope. Management reserve sits above the project budget and is controlled by senior management for unforeseen scope or business risks.

Question 31Cost Estimating

The main purpose of an estimate basis document is to:

  1. establish the contractor's legal bid price
  2. replace the need for a detailed quantity takeoff
  3. record the project schedule critical path
  4. document scope, assumptions, pricing sources and exclusions Correct answer.

Explanation

The estimate basis explains how the estimate was built, including scope boundaries, assumptions, pricing sources, and exclusions. It allows reviewers to understand and validate the estimate.

Question 32Cost Estimating

Under a lump-sum fixed-price contract, the contractor generally bears the risk of:

  1. owner-directed scope changes after contract award
  2. late delivery of owner-furnished equipment
  3. delays caused by force majeure events
  4. cost overruns from its own productivity and pricing assumptions Correct answer.

Explanation

In a lump-sum fixed-price contract, the contractor commits to a price and absorbs cost variances from its own means and methods. Owner changes, force majeure and owner-furnished items are normally handled through other contract provisions.

Question 33Cost Estimating

A crew of four workers each earns $45 per hour. Productivity is 0.5 crew-hours per unit. What is the labor cost per unit?

  1. $180.00
  2. $22.50
  3. $90.00 Correct answer.
  4. $45.00

Explanation

The crew rate is four workers multiplied by $45 per hour, which equals $180 per crew-hour. At 0.5 crew-hours per unit, labor cost is $180 multiplied by 0.5, or $90 per unit.

Question 34Cost Estimating

Equipment costs $200,000, has a salvage value of $20,000 and a useful life of 10,000 hours. What is straight-line depreciation per hour?

  1. $2.00
  2. $18.00 Correct answer.
  3. $20.00
  4. $22.00

Explanation

Straight-line depreciation is the depreciable amount divided by life hours: ($200,000 minus $20,000) divided by 10,000, which equals $18.00 per hour.

Question 35Cost Estimating

Direct costs are $80,000 for material and $50,000 for labor. Indirect costs are 12% of direct cost. What is the total cost?

  1. $147,000
  2. $156,000
  3. $130,000
  4. $145,600 Correct answer.

Explanation

Direct cost is $80,000 plus $50,000, or $130,000. Indirect cost is 12% of $130,000, or $15,600, so total cost is $145,600.

Question 36Cost Estimating

Overhead of 10% and profit of 8% are applied sequentially to a direct cost. What is the composite multiplier?

  1. 1.100
  2. 1.188 Correct answer.
  3. 1.080
  4. 1.180

Explanation

Sequential markups compound: 1.10 multiplied by 1.08 equals 1.188. Adding the two percentages as 18% would ignore the compounding effect.

Question 37Cost Estimating

If labor hours per unit are reduced by 20% through a productivity initiative, the new hours per unit are:

  1. 0.20 of the original hours
  2. 1.20 of the original hours
  3. 0.83 of the original hours
  4. 0.80 of the original hours Correct answer.

Explanation

A 20% reduction in labor hours per unit leaves 80% of the original hours, so the multiplier is 0.80. The value 0.83 would apply if output per hour increased by 20%, which is a different statement.

Question 38Cost Estimating

Two hundred labor hours are worked at a base rate of $40 per hour with a 15% overtime premium. What is the overtime labor cost?

  1. $10,000
  2. $8,600
  3. $8,000
  4. $9,200 Correct answer.

Explanation

The base labor cost is 200 hours multiplied by $40 per hour, or $8,000. Applying the 15% premium gives $8,000 multiplied by 1.15, or $9,200.

Question 39Cost Estimating

Materials cost $50,000 before tax, and a 7% sales tax applies to materials only. What is the total material cost?

  1. $50,000
  2. $53,500 Correct answer.
  3. $46,500
  4. $57,500

Explanation

Sales tax is 7% of $50,000, or $3,500. The total material cost including tax is $50,000 plus $3,500, or $53,500.

Question 40Cost Estimating

Equipment has an FOB price of $100,000. Freight is 5% of FOB and duty is 8% of FOB. What is the landed cost?

  1. $108,000
  2. $105,000
  3. $113,000 Correct answer.
  4. $110,000

Explanation

Freight is $5,000 and duty is $8,000, both calculated on the FOB price. Landed cost is $100,000 plus $5,000 plus $8,000, or $113,000.

Question 41Cost Estimating

At an early project stage with limited scope definition, which estimating method is most appropriate?

  1. an analogous estimate based on similar past projects Correct answer.
  2. a detailed bottom-up estimate from drawings
  3. a quantity takeoff priced with current vendor quotes
  4. a firm bid obtained from a single subcontractor

Explanation

When scope is poorly defined, analogous estimating uses completed similar projects as the basis and scales or adjusts them. Detailed bottom-up methods require defined quantities and specifications.

Question 42Cost Estimating

A project cost code structure is used in estimating primarily to:

  1. replace the work breakdown structure
  2. map estimate line items to work packages and accounts Correct answer.
  3. establish the contract completion date
  4. calculate the project's internal rate of return

Explanation

Cost codes align estimate items with the work breakdown and accounting structure, enabling budget transfer and cost control. They complement rather than replace the work breakdown structure.

Question 43Cost Estimating

Annual escalation is 4%. An estimate is stated in Year 0 dollars. What escalation factor applies to expenditure at the end of Year 3?

  1. 1.1200
  2. 1.1300
  3. 1.1225
  4. 1.1249 Correct answer.

Explanation

Compound escalation is (1 plus 0.04) raised to the third power, which equals 1.124864 and rounds to 1.1249. Simply multiplying three years by 4% would understate the effect of compounding.

Question 44Cost Estimating

A base estimate is $2.0 million. Contingency is 10% of the base estimate, and management reserve is 5% of the base estimate. What are the control budget and total funding?

  1. Control budget $2.00M; total funding $2.10M
  2. Control budget $2.30M; total funding $2.30M
  3. Control budget $2.20M; total funding $2.30M Correct answer.
  4. Control budget $2.10M; total funding $2.20M

Explanation

Contingency is $0.20M and is included in the control budget, giving $2.20M. Management reserve of $0.10M sits outside the project budget, so total funding is $2.30M.

Question 45Cost Estimating

An unbalanced bid is one in which the bidder:

  1. adjusts unit prices while keeping the total bid unchanged Correct answer.
  2. refuses to bid on selected pay items
  3. submits a bid that is higher than the engineer's estimate
  4. prices every pay item at the same unit rate

Explanation

An unbalanced bid keeps the total bid price the same while shifting unit prices between items, often to improve early cash flow or exploit quantity changes. It can create risk for the owner if quantities change.

Question 46Cost Estimating

Alternative A has an initial cost of $100,000 and annual operating cost of $10,000 for 10 years. Alternative B has an initial cost of $140,000 and annual operating cost of $5,000 for 10 years. Using an annuity present worth factor of 6.710 at 8%, which alternative has the lower life-cycle cost and by how much?

  1. Alternative B by about $6,450
  2. Alternative A by about $6,450 Correct answer.
  3. The two alternatives are equal
  4. Alternative A by about $40,000

Explanation

Present worth of operating cost is $10,000 times 6.710, or $67,100 for A, and $5,000 times 6.710, or $33,550 for B. Life-cycle costs are $167,100 for A and $173,550 for B, so A is lower by about $6,450.

Question 47Cost Estimating

Sensitivity analysis in cost estimating is used to:

  1. replace contingency with a fixed percentage
  2. calculate the exact probability of exceeding the budget
  3. eliminate all uncertainty from the estimate
  4. identify which variables most influence total project cost Correct answer.

Explanation

Sensitivity analysis varies one input at a time to see how the output responds, revealing the drivers that most affect cost. It does not by itself provide probability distributions or remove uncertainty.

Question 48Cost Estimating

An estimate S-curve is typically used to:

  1. forecast cumulative project cost over time Correct answer.
  2. determine the equipment depreciation schedule
  3. compare bid prices from contractors
  4. calculate the learning curve rate for labor

Explanation

The S-curve plots cumulative cost or progress against time and supports cash flow planning. It reflects the typical slow start, rapid middle and tapering completion of project expenditure.

Question 49Cost Estimating

Value engineering in cost estimating focuses on:

  1. reducing cost by lowering all specified quality levels
  2. improving function while reducing life-cycle cost Correct answer.
  3. increasing the contingency percentage
  4. selecting the lowest initial bid

Explanation

Value engineering analyzes function versus cost to find alternatives that preserve or improve performance at lower life-cycle cost. It is not simply cost cutting or choosing the lowest bid.

Question 50Cost Estimating

A process plant with a capacity of 100,000 tonnes per year was built for $50 million. Using a capacity cost exponent of 0.6, what is the estimated cost of a similar plant with a capacity of 200,000 tonnes per year (ignoring escalation and location factors)?

  1. $75.8 million Correct answer.
  2. $60.0 million
  3. $100.0 million
  4. $65.7 million

Explanation

The capacity cost factor method scales cost by the ratio of capacities raised to an exponent, cost2 = cost1 x (capacity2/capacity1)^n. With a doubling of capacity and n = 0.6, the multiplier is 2^0.6 = 1.516, giving $50 million x 1.516 = $75.8 million. The exponent below 1.0 reflects economies of scale, so cost rises less than proportionally to capacity.