Argus Question: Grossing up expenses
Hi everyone,

Studying for the Argus Certification Exam and came across this question:

&amp;#x200B;

https://preview.redd.it/wm6ia84tvba51.png?width=559&amp;format=png&amp;auto=webp&amp;s=ee40340d917a08f086dc4920634d6f830310ae2b

The right answer is apparently $26,400. Can someone explain why the used the 70% occupancy figure instead of grossing it up to 100%. Makes no sense to me so I'd love some clarity!

Thank you!
[{"id": "fxs9hau", "text": "It is a little weird but here is the math\n\nGross-Up:\n$30,000 x (1-60%) = $12,000\n\n12,000/(70% x 100%)= 17,143\n\n17,143+(30,000-12,000)= 35,143\n\n35,143 x 70% = $24,600", "replies": [{"id": "fxt4im2", "text": "Definitely weird but thanks for showing this breakdown!", "replies": [], "depth": 2}], "depth": 1}, {"id": "fxskeg6", "text": "You gross up the occupancy for the variable portion of the fixed expenses. \n\n60% x $30,000 = $18,000\n\n70% x $12,000 = $8,400. \n\nGrossing up the reimbursable expenses only affects the way tenants reimburse on a pro-rata basis \u2014 it will look the same on the cash flow report. \n\n[Here is a great example. ](https://www.lexology.com/library/detail.aspx?g=1e733e28-36cc-419b-8e17-9e77850bb659)", "replies": [{"id": "fxt4i1z", "text": "Thank you! That attachment was helpful, I feel I need the theoretical not the calculation help!", "replies": [], "depth": 2}], "depth": 1}, {"id": "fxsmg4z", "text": "I always found it confusingly worded as well, the $30k number they give you is what the CAM expenses at 100% occupancy would be. Not at the 70% occupancy scenario they give you. \n  \nSo as the other comments mention, break into fixed and variable. So in this case the $18k of fixed costs are always there regardless of occupancy. \n \nAt 0% occupancy, your costs are just the fixed amount of $18k. At 100% they are at $30k. \n \nI have a spreadsheet that breaks it out visually and graphs it, PM me if you want.", "replies": [{"id": "fxsoy0w", "text": "It\u2019s intentionally confusingly worded because it\u2019s testing that you understand that grossing up reimbursable expenses won\u2019t necessarily look different on the cash flow report than if they weren\u2019t grossed up. But if you don\u2019t gross them up, your recoveries will be off since tenants would not pay the full $8,400 of variable expenses.", "replies": [{"id": "fxstztd", "text": "Yes I completely agree. Your previous comment summarizing it did a great job spelling out the math. \n \nThe disconnect for me was between how I\u2019ve seen offering memos presented with $ and versus how the Argus info presents and words them based on 100% occupancy.", "replies": [{"id": "fxsufc8", "text": "Right. You\u2019ll pretty much always need the lease agreements and financial statements to get the whole picture for reimbursements.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fxuxgcs", "text": "If you\u2019re looking at the Argus inputs and not the outputs, it actually makes more sense. If you\u2019re asking the question theoretically in a vacuum or academic setting or setting up an excel model, you\u2019re right about the confusion", "replies": [], "depth": 2}], "depth": 1}, {"id": "fxsz9z2", "text": "One last comment/question- are you studying off one of the Argus classes/workshops that they put on?", "replies": [{"id": "fxt4ljt", "text": "I got the certification bundle, so that was just the videos + manual", "replies": [{"id": "fxtdz85", "text": "The one that\u2019s just under 300 pages right?", "replies": [], "depth": 3}, {"id": "g0olw4o", "text": "I\u2019m going to start and buy the certification next week. Any tips?", "replies": [{"id": "g0onm63", "text": "Make sure to do all the cases in the manual, and do them while going through it. It was the most helpful thing to do imo. The videos weren\u2019t very useful (unless you have zero experience in Argus) For the actual exam, make a word doc of all the multiple choice questions you find online (pretty easy to google). A lot of them ended up being the same.", "replies": [{"id": "g0ophj9", "text": "Thanks tb! Appreciate it", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]