Construction Management Cost Estimating & Financial Management 1 — Questions and Answers
Question 1: Which level of cost estimate is typically used at the conceptual design phase and carries an accuracy range of -30% to +50%?
- Order-of-magnitude estimate (Correct answer)
- Schematic design estimate
- Design development estimate
- Definitive estimate
Correct answer: Order-of-magnitude estimate
An order-of-magnitude (Class 5) estimate is prepared with minimal design information and is used for feasibility screening, carrying wide accuracy ranges.
Question 2: The difference between a contractor's direct costs and the project bid price is commonly referred to as:
- Markup (Correct answer)
- Overhead allocation
- Profit margin
- Contingency
Correct answer: Markup
Markup is the percentage added to direct costs to cover general overhead, profit, and contingency, resulting in the final bid price.
Question 3: General overhead (sometimes called home office overhead) typically includes costs such as:
- Office rent, executive salaries, and accounting staff (Correct answer)
- Concrete formwork labor on site
- Crane rental for the specific project
- Subcontractor invoices
Correct answer: Office rent, executive salaries, and accounting staff
General overhead covers company-wide expenses not tied to a single project, such as corporate office costs, management salaries, and administrative functions.
Question 4: A quantity takeoff in construction estimating refers to:
- Measuring and counting all materials and work items from drawings and specs (Correct answer)
- Evaluating subcontractor bids for accuracy
- Tracking actual costs against the budget during construction
- Calculating overtime costs for the labor force
Correct answer: Measuring and counting all materials and work items from drawings and specs
A quantity takeoff is the systematic process of measuring, counting, and listing all quantities of work from contract documents as the foundation for pricing.
Question 5: Which cost estimating method calculates costs by multiplying measured quantities by unit prices?
- Unit price estimating (Correct answer)
- Parametric estimating
- Assembly estimating
- Analogous estimating
Correct answer: Unit price estimating
Unit price estimating applies a cost per unit of measure (e.g., $/CY of concrete, $/SF of drywall) to the measured quantity to arrive at a total cost.
Question 6: Bid bonds on public construction projects are typically set at what percentage of the bid amount?
- 5–10% (Correct answer)
- 1–2%
- 25–30%
- 50%
Correct answer: 5–10%
Bid bonds, which guarantee the bidder will enter the contract if awarded, are commonly required at 5–10% of the total bid price on public projects.
Construction Management Cost Estimating & Financial Management 1
Which level of cost estimate is typically used at the conceptual design phase and carries an accuracy range of -30% to +50%?