CEC Overhead & Profit Calculation 2

Question 1

A contractor has annual general overhead of $480,000 and projects $2,400,000 in direct costs for the year. What overhead rate should be applied to each project's direct costs?

Accepted Answer

20%

Answer

Overhead rate = $480,000 ÷ $2,400,000 = 20%.

Question 2

Which of the following is classified as a job overhead (project overhead) cost rather than general overhead?

Accepted Answer

Temporary site fencing

Answer

Temporary site fencing is a direct project cost charged to a specific job, making it job overhead.

Question 3

A contractor applies a 15% overhead markup and a 10% profit markup to direct costs. If direct costs are $50,000, what is the total bid price?

Accepted Answer

$62,500

Answer

Overhead = $7,500; Profit = $5,000 (10% of direct costs); Total = $50,000 + $7,500 + $5,000 = $62,500.

Question 4

What does the term 'net profit' mean in construction estimating?

Accepted Answer

Profit remaining after all costs including overhead are subtracted from revenue

Answer

Net profit is what remains after subtracting all costs—direct costs and overhead—from total revenue.

Question 5

A subcontractor quotes $80,000 for electrical work. A general contractor applies 10% overhead and 8% profit to the sub's price. What is the GC's total charge to the owner for this work?

Accepted Answer

$95,040

Answer

Overhead = $8,000; Profit = 8% × ($80,000 + $8,000) = $7,040; Total = $80,000 + $8,000 + $7,040 = $95,040.

(CEC) Construction Estimator Certification Practice Test

(CEC) Construction Estimator Certification Practice Test

CEC Overhead & Profit Calculation 2