CLC Estimating & Cost Control Flashcards

What is the purpose of a contingency allowance in a project estimate?

Answer: To cover unforeseen conditions or scope items discovered during construction

A contingency (typically 5–15% of total cost) is a financial reserve for unknown or unforeseen conditions that could not be priced during the estimate phase.

Which document formally authorizes additional work beyond the original contract scope?

Answer: Change order

A change order is a signed written agreement between the contractor and client that authorizes changes in scope, cost, or schedule before the additional work begins.

To calculate a selling price that includes overhead and profit, a contractor should:

Answer: Divide direct costs by (1 minus the desired margin percentage)

Using markup on cost versus margin on price are different calculations — to hit a target gross margin, divide cost by (1 − margin%) rather than simply adding the percentage to cost.

What is a Schedule of Values (SOV) used for on a construction project?

Answer: Breaking the contract sum into line items tied to measurable work for progress billing

A Schedule of Values assigns a dollar amount to each phase or work item so that progress payments can be calculated based on the percentage of each item completed.

Job costing involves comparing:

Answer: Actual job costs to estimated job costs to measure profitability

Job costing tracks actual labor, material, and overhead costs incurred on a specific project and compares them to the original estimate to determine job profitability.

Which of the following best describes the concept of 'breakeven point' for a carpentry business?

Answer: The revenue level at which total income equals total costs with zero profit

The breakeven point is the revenue level at which total sales exactly cover all fixed and variable costs, resulting in neither profit nor loss.