A firm manages a 50-unit apartment building under an agreement paying it 8% of rents collected plus a flat $500 monthly administrative fee. Scheduled rent for the month is $60,000, but two vacancies and one delinquent tenant leave $54,000 actually collected. What has the firm earned for that month?
Correct Answer
A) $4,820
A percentage management fee is calculated on rent collected, not on scheduled or potential rent, so 8% of $54,000 gives $4,320. The flat administrative fee is a separate component added on top, bringing the total to $4,820. Structuring a management fee as a percentage plus a flat amount is common, and the management agreement controls both the rate and the base it applies to.
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