# 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 & Equip 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.

## 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

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

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:  Month Amount 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.

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

• 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.

### 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.