CPE Overhead & Profit Calculation 2

Question 1

A contractor's annual general overhead is $480,000 and projected annual revenue is $3,200,000. What overhead rate should be applied to direct costs if direct costs are 75% of revenue?

Accepted Answer

20%

Answer

Direct costs = $3,200,000 × 0.75 = $2,400,000; overhead rate = $480,000 / $2,400,000 = 20%.

Question 2

Which cost is most accurately classified as a project-specific (job) overhead rather than general overhead?

Accepted Answer

Temporary site fencing

Answer

Temporary site fencing is a cost incurred solely for one project, making it a job overhead item.

Question 3

A contractor applies a 12% overhead markup and a 10% profit markup sequentially to $100,000 in direct costs. What is the final bid price?

Accepted Answer

$123,200

Answer

Overhead: $100,000 × 1.12 = $112,000; profit: $112,000 × 1.10 = $123,200.

Question 4

When overhead is expressed as a percentage of direct labor only, which overhead items are most appropriate to include in that pool?

Accepted Answer

Labor-related burdens such as supervision and small tools

Answer

Labor-driven overhead items like supervision and small tools are most logically allocated as a percentage of direct labor.

Question 5

A company has fixed overhead of $200,000 and variable overhead of $1.50 per direct labor hour. If 80,000 labor hours are projected, what is the total overhead?

Accepted Answer

$320,000

Answer

Variable overhead = 80,000 × $1.50 = $120,000; total = $200,000 + $120,000 = $320,000.

(CPE) Certified Professional Estimator Practice Test

(CPE) Certified Professional Estimator Practice Test

CPE Overhead & Profit Calculation 2