IACP Cost Approach & Depreciation Analysis 2

Question 1

The quantity survey method of cost estimating is considered the most accurate because it:

Accepted Answer

Itemizes all materials, labor, overhead, and profit for every component of construction

Answer

Uses only published national cost indices adjusted to local markets

Answer

Applies a single cost-per-square-foot factor to the gross building area

Answer

Estimates costs by pricing individual installed building components in place

Question 2

When using the cost approach, an appraiser who estimates replacement cost rather than reproduction cost is accounting for:

Accepted Answer

Functional obsolescence already by substituting modern equivalent materials

Answer

All forms of accrued depreciation including physical, functional, and external

Answer

The cost of land as a separate component from the structure

Answer

The remaining economic life of the existing structure

Question 3

A building has a chronological age of 20 years but has been well maintained and updated. Its effective age is estimated at 12 years. This difference indicates:

Accepted Answer

The owner's capital improvements and upkeep have extended the building's economic life

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The structure has suffered excessive deferred maintenance

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External obsolescence has reduced the property's market value

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The building's total economic life has decreased due to market conditions

Question 4

Which statement correctly describes 'incurable functional obsolescence' in the cost approach?

Accepted Answer

A deficiency where correction is either physically impossible or economically unwarranted

Answer

A deficiency that can be corrected and where the cost to cure equals the value added

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Physical damage that requires rebuilding portions of the structure to correct

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Depreciation caused by factors external to the property that the owner cannot control

Question 5

In the cost approach, entrepreneurial profit (developer's profit) is:

Accepted Answer

The return a developer expects for taking the risk of creating a new property

Answer

Excluded because it represents speculation rather than actual construction cost

Answer

The contractor's overhead and profit built into construction bids

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The difference between the appraised value and the assessed tax value

Question 6

The 'unit-in-place' method estimates construction costs by:

Accepted Answer

Pricing complete installed subsystems such as roofing, HVAC, or plumbing per unit

Answer

Applying a cost per square foot to the total building gross area

Answer

Adjusting a historical cost index to current market conditions

Answer

Surveying the quantity of every material and labor unit in the building

Question 7

When calculating accrued depreciation using the breakdown method, an appraiser separately estimates:

Accepted Answer

Physical deterioration, functional obsolescence, and external obsolescence independently

Answer

Only physical deterioration and external obsolescence

Answer

Replacement cost and reproduction cost to find the difference

Answer

Chronological age and remaining economic life using market sales