CPC Construction Business Management & Finance Flashcards
6 cards from real CPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CPC Construction Business Management & Finance flashcards as text
What is a 'performance bond' and who benefits from it on a construction project?
Answer: A surety bond guaranteeing the contractor will complete the project per contract; the owner is the obligee
A performance bond is a three-party agreement where the surety guarantees that if the contractor defaults, the surety will complete the project or compensate the owner.
How is 'overhead' typically allocated to individual construction projects in job costing?
Answer: Distributed as a percentage of direct labor costs, revenue, or total direct costs
Overhead allocation rates are typically calculated as a percentage of direct labor, revenue, or total direct costs so that each project bears a fair share of indirect costs.
What is the 'contractor's all-risk' (CAR) insurance policy designed to cover?
Answer: Physical loss or damage to the works, plant, equipment, and third-party liability during construction
CAR insurance provides broad all-risk coverage for the construction works in progress, contractor's plant/equipment, and third-party bodily injury and property damage.
Which method of project delivery places design and construction responsibility under a single contract with one entity?
Answer: Design-Build (DB)
In Design-Build, a single entity is responsible for both design and construction, allowing design and construction phases to overlap and simplifying owner-contractor relationships.
What is a 'mechanic's lien' and when can a contractor or supplier file one?
Answer: A statutory claim against a property securing payment for labor or materials; when the contractor or supplier is not paid
Mechanic's liens are statutory security interests against property that attach when contractors, subcontractors, or suppliers furnish labor or materials and are not paid.
In the context of contractor financial statements, what is 'underbillings' (costs in excess of billings)?
Answer: A current asset representing earned revenue not yet billed, indicating the contractor is behind on invoicing
Underbillings (costs in excess of billings) indicate that the contractor has incurred costs and performed work beyond what it has invoiced, representing earned but uncollected revenue.