# Ranch House Summary Page Walkthrough

Once the Tools & Equpment and Overhead tabs of your Ranch House Estimate are complete, you can begin working on the Summary page.

The purpose of this assignment is to review the totals of the Ranch House Estimate in each of Construction Phase tabs. Additionally, you must complete the following tasks for successful completion of the Summary Tab:

• Ensure that the Overhead, Profit, and Sales Tax percentages are entered correctly.
• Determine which items in each phase will include adjustments to the base cost calculated in their tabs.

## Enter Overhead, Profit, & Sales Tax %

The first step is quite simple for this assignment.

### Overhead, Profit, & Sales Tax %

Please note the following points, then enter the correct numbers in the Summary tab of the Ranch House Estimating Workbook.

• Overhead % is calculated as estimated yearly overhead divided by estimated yearly gross Income. You can find this figure in the Overhead tab.
• This construction company completes its initial estimate with a 12% profit.
• Idaho sales tax is 6%.

Example: A construction company always completes initial estimates with a 10% profit. Their estimated yearly overhead and estimated yearly gross income are $132,600 and$1,000,000 respectively.

$$\frac{\132600}{\1000000}=.1326=13.26\%$$

The resulting figures in the Cost Summary Header would be as follows:

 Overhead % 13.26% Profit % 10% Sales Tax Rate % 6%

#### Enter the Following in Your Ranch House Estimating Workbook

• Overhead % = Your calculated number from the Overhead tab, assuming \$1,600,000 of estimated yearly gross income.
• Profit % = 12%
• Sales Tax % = 6%

## Accounting for Overhead, Profit, and Sales Tax

The next step for completing the Summary tab of the Ranch House Estimating Workbook requires you to select which items will include adjustments for overhead, profit, and sales tax. Use the following guidelines to do so.

### How to Calculate Overhead, Profit, and Sales Tax in the Estimating Workbook

The Summary tab includes a total of each subsection of each construction phase. Within those tables are columns for Overhead, Profit, and Sales Tax.

To add adjustments to a line item for Overhead, Profit, and/or Sales Tax, add an "x" into the the provided space in the column for each respective adjustment. The calculation will be completed and added to the total cost for the line item.

#### Example

In the following example, notice that the columns for Overhead, Profit, and Sales Tax that include an "x" include a calculation based on the respective percentages in the Summary tab heading, and that a total is for each line item is calculated.

### Recommended Guidelines for Adjusting Costs for Overhead, Profit, and Sales Tax

• No overhead for costs and fees for the project that do not require the labor of company employees (eg. Architecture, Jobsite Facilities, etc.)
• Charge overhead for all labor costs.
• Charge overhead for all subcontractor costs because a company employee will bid level and will be onsite to supervise the work.
• Charge overhead for all allowance items because company employees will be buying the material and installing it.

#### Recommended Guidelines for Profit

• No profit for costs and fees for the project that do not require the labor of company employees (eg. Architecture, Jobsite Facilities, etc.)
• No profit for materials.
• Charge profit for all labor costs.
• Charge profit for all subcontractor costs because a company employee will be onsite to supervise the work.
• Charge profit for all allowance items because company employees will be buying the material and installing it.

#### Guidelines for Adding Sales Tax to Line Items

Sales tax must be paid. It is the law.

• Add sales tax to all materials, fees, and allowances.
• Do not add sales to to labor items.
• Add sales tax for special line items with especially large tax loads (eg. Real Estate Fees)

Remember, sales tax must be accounted for and paid by someone. If it is not included in line items as outlined above, the client will not pay them. In this scenario the construction company will pay sales tax, which will cut into profit.

#### Example

 Cost Category Overhead Profit Sales Tax Allowance X X X Fees (Require Employee Supervision) X X X Fees (No Employee Supervision) X Labor X X Materials X Other (Require Employee Supervision) X X X Other (No Employee Supervision) X Subs X X