Construction Planning and Management Flashcards

Which estimate type is typically prepared at the conceptual stage using cost per square foot?

Answer: Square-foot (parametric) estimate

Early-stage estimates often multiply the planned area by a historical cost per square foot because detailed plans are not yet available.

A builder's gross profit margin is 20% on a home with a selling price of $500,000. What is the gross profit?

Answer: $100,000

Margin is calculated on the selling price, so 20% of $500,000 equals $100,000.

Direct construction costs are $400,000 and the builder wants a 25% markup on cost. What is the selling price before other adjustments?

Answer: $500,000

Markup is applied to cost, so $400,000 × 1.25 equals $500,000.

Which of the following is an indirect (overhead) cost rather than a direct job cost?

Answer: Office rent for the builder's headquarters

Office rent supports the whole company and is not tied to a single job, making it company overhead.

What is the main purpose of a job cost report during construction?

Answer: Compare actual costs to the budget by cost code to spot overruns early

Job cost reports show budget versus actual by category so the builder can take corrective action while the job is still in progress.

Why do builders include a contingency line in a construction budget?

Answer: To cover unforeseen costs and estimating uncertainties

Contingency is a reserve for unknown risks such as hidden site conditions or price escalation.

A homeowner selects $9,000 flooring against a $6,000 flooring allowance. How is this normally handled?

Answer: The $3,000 overage is charged to the owner, typically through a change order

Allowance overages are the owner's responsibility and are documented with a change order or allowance reconciliation.