Cost Estimation & Budgeting Flashcards

A contractor uses the 'square foot method' for a preliminary cost estimate. What is the PRIMARY limitation of this approach?

Answer: It ignores local labor and material cost variations

The square foot method uses average costs that may not reflect local market conditions for labor and materials.

When preparing a bid, a contractor determines that subcontractor quotes represent 60% of total project cost. If subcontractor costs increase 10%, what is the overall project cost increase?

Answer: 6%

A 10% increase on 60% of costs equals 6% total project cost increase (0.10 × 0.60 = 0.06).

A homeowner requests a change order to upgrade flooring after the contract is signed. The contractor should price this change order based on:

Answer: Current market prices at time of change order

Change orders should reflect current market prices since material and labor costs may have changed since the original bid.

Which contingency percentage is most commonly used in residential construction budgets for unforeseen conditions?

Answer: 5-10%

A 5-10% contingency is standard in residential construction to cover unforeseen conditions and minor scope changes.

An estimator calculates that a roofing job requires 2,400 sq ft of shingles. Accounting for a 10% waste factor, how many squares should be ordered?

Answer: 26.4 squares

2,400 sq ft ÷ 100 = 24 squares, plus 10% waste = 24 × 1.10 = 26.4 squares.

What does the term 'value engineering' mean in the context of residential cost estimation?

Answer: Finding alternative methods or materials that maintain function while reducing cost

Value engineering identifies cost-saving alternatives that preserve the intended function and quality of the project.

A contractor's bid includes $150,000 in direct costs. If overhead is 12% and profit is 8%, what is the total bid price?

Answer: $180,000

Overhead = $150,000 × 0.12 = $18,000; Profit = $150,000 × 0.08 = $12,000; Total = $150,000 + $18,000 + $12,000 = $180,000.