• Construction Estimating Reference Book
  • 1. Estimating Basics
  • 2. Construction Estimating Tools
  • 3. General Estimating Guides and Aids
  • 4. Assignment Walkthroughs
  • 5. Construction Materials and Process Index
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  • Small Cottage Tools & Equip, Overhead, & Summary Walkthrough

    Once the Subs tab of your Small Cottage Estimate is complete, you can begin working on the Summary tab. Please note that Tools & Equip tab and Overhead tab have been completed for you.

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


    Complete the Tools & Equipment Tab

    Calculate the Interests Costs of All Listed Equipment.

    For the purposes of this assignment, use the following formulas to calculate Montly, Yearly, and Total interest costs, respectively.

    Total Interest Cost

    $$ Total\:Interest\:Cost\:=\:\frac{Purchase\:Price\:\times\:Interest\:Rate\:\times\:Loan\:Term}{2} $$
    Example

    A skid steer was purchased for $40,000. The construction company secured a $30,000 loan at 5% interest over a 3 year term. The total interest cost would be calculated as follows:

    $$ \frac{\$40000\:\times\:.05\:\times\:3}{2}\:=\:\$3000 $$

    Yearly Interest Cost

    $$ Yearly\:Interest\:Cost\:=\:\frac{Total\:Interest\:Cost}{Loan\:Term} $$
    Example

    The yearly interest cost for the skid steer would be calculated as follows:

    $$ \frac{\$3000}{3}\:=\:\$1000 $$

    Monthly Interest Cost

    $$ Montly\:Interest\:Cost\:=\:\frac{Yearly\:Interest\:Cost}{12} $$
    Example

    The monthly interest cost for the skid steer would be calculated as follows:

    $$ \frac{\$1000}{12}\:=\:\$83.33 $$

    Calculate the Depreciation of All Listed Equipment.

    For the purposes of this assignment, use the following formulas to calculate Montly, Yearly, and Total depreciation costs, respectively.

    Total Depreciation Cost

    $$ Total\:Depreciation\:Cost\:=\:Purchase\:Price\:-\:Scrap\:Value $$
    Example

    A skid steer was purchased for $40,000. The scrap value of the skid steer after its service life of 6 years is $7000. The total depreciation cost would be calculated as follows:

    $$ \$40000\:-\:\$7000\:=\:\$33000 $$

    Yearly Depreciation Cost

    $$ Yearly\:Depreciation\:Cost\:=\frac{\:Purchase\:Price\:-\:Scrap\:Value}{Service\:Life} $$
    Example

    The yearly depreciation cost for the skid steer would be calculated as follows:

    $$ \frac{\$40000\:-\:\$7000}{6}\:=\:\$5500 $$

    Monthly Depreciation Cost

    $$ Montly\:Depreciation\:Cost\:=\:\frac{Yearly\:Depreciation\:Cost}{12} $$
    Example

    The monthly depreciation cost for the skid steer would be calculated as follows:

    $$ \frac{\$5500}{12}\:=\:\$458.33 $$

    Calculate the Monthly Taxes of All Listed Equipment.

    For the purposes of this assignment, use the following formulas to calculate Montly taxes.

    Monthly Taxes

    $$ Monthly\:Taxes\:=\:\frac{Yearly\:Taxes}{12} $$
    Example

    A skid steer has yearly tax costs of $800. The monthly tax cost would be calculated as follows:

    $$ \frac{\$800}{12}\:=\:\$66.67 $$

    Calculate the Total Monthly and Yearly Costs of All Listed Equipment.

    Total Monthly Costs

    Add the monthly interest, depreciation, and tax costs of each piece of equipment to calculate the total monthly cost.

    Total Yearly Costs

    Add the yearly interest, depreciation, and tax costs of each piece of equipment to calculate the total yearly cost.

    What to Enter in the Tools Table

    The company accountant has given you the following numbers to enter in the Tools & Equip tab of the Estimating Workbook based on a forecast completed earlier.

    In the Total Tools column (B), add the following values for each month:

    Table of Monthly Tool Figures to Enter
    MonthAmount
    January$700
    February$250
    March$350
    April$300
    May$425
    June$150
    July$600
    August$300
    September$450
    October$175
    November$300
    December$400

    Complete the Overhead Tab

    What to Enter in the Overhead Table

    The company accountant has given you the following numbers to enter in the Overhead tab of the Estimating Workbook based on a forecast completed earlier.

    January

    February

    March

    April

    May

    June

    Advertising

    $500

    $250

    $200

    $250

    $200

    $250

    Office Personnel

    Leave Alone

    Computers

    $1850

    $225

    $0

    $0

    $0

    $0

    Dues and Subscriptions

    $50

    $50

    $50

    $50

    $50

    $50

    Electricity for Office

    $150

    $150

    $150

    $150

    $150

    $150

    Heat for Office (Gas)

    $120

    $100

    $80

    $60

    $30

    $20

    General Insurance

    $1450

    $1450

    $1450

    $1450

    $1450

    $1450

    Health Insurance

    Leave Alone

    Meals and Entertainment

    $400

    $400

    $400

    $400

    $400

    $400

    Office Supplies

    $175

    $175

    $175

    $175

    $175

    $175

    Officer Salaries

    Leave Alone

    Postage

    $25

    $25

    $25

    $25

    $25

    $25

    Professional Fees

    $1590

    $100

    0

    0

    0

    0

    Rental Expenses

    $650

    $650

    $650

    $650

    $650

    $650

    Telephone

    $250

    $250

    $250

    $250

    $250

    $250

    Tools and Equipment

    Leave Alone

    Travel

    $200

    $200

    $200

    $200

    $200

    $200

    Vehicles

    $550

    $550

    $550

    $550

    $550

    $550

    Enter the Estimated Yearly Gross Overhead, Gross Wages, and Calculate Overhead as a Percentage of Income

    Base your calculation on an estimated yearly gross income of $2,000,000.

    Yearly Gross Overhead

    This is calculated as the sum of all yearly estimates for each overhead line item. See your Ranch House Estimate as an example.

    Yearly Gross Wages

    This is calculated as the sum of the Total Net Annual Payroll Amount for each employee from the Wage tab of your estimating workbook. See your Ranch House Estimate as an example.

    Overhead as a Percentage of Income

    Calculate this figure by dividing your Estimate Yearly Gross Overhead by your Estimated Yearly Gross Income ($2,000,000).


    Enter Overhead, Profit, & Sales Tax %

    Navigate to the Summary tab of your Small Cottage Estimating Workbook.

    Overhead, Profit, & Sales Tax %

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

    • Enter the number you calculated on the Overhead tab for Overhead as a Percentage of Income.
    • Your construction company has asked you to complete the Small Cottage estimate based on a 10% profit figure.
    • Idaho sales tax is 6%.

    Accounting for Overhead, Profit, and Sales Tax

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

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

    Recommended Guidelines for Overhead

    • No overhead for costs and fees for the project that do not require the labor of company employees (eg. Architecture, Jobsite Facilities, etc.)
    • No overhead for materials. Instead, make up overhead costs on the labor costs.
    • 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.


    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.

    Pre-Construction Cost Totals with Adjustments
    Pre-Construction Cost Totals with Adjustments

    This content is provided to you freely by BYU-I Books.

    Access it online or download it at https://books.byui.edu/construction_estimat/small_cottage_summar.