CRC Budgeting & Cost Estimation 2 — Questions and Answers
Question 1: A contractor is preparing a bid for a 2,000 sq ft single-family home. If the local cost index is 1.15 and the national baseline cost is $90 per sq ft, what is the adjusted estimated cost?
- $180,000
- $207,000 (Correct answer)
- $193,500
- $225,000
Correct answer: $207,000
Multiply 2,000 sq ft × $90 × 1.15 = $207,000.
Question 2: Which estimating method divides a project into individual work packages and prices each separately before totaling?
- Unit price estimating
- Assembly estimating
- Quantity takeoff estimating (Correct answer)
- Parametric estimating
Correct answer: Quantity takeoff estimating
Quantity takeoff estimating itemizes every material and labor component by measuring quantities from plans.
Question 3: A residential project has a direct cost of $320,000. The contractor applies a 12% overhead rate and a 10% profit margin on the total selling price. What is the correct selling price?
- $403,200
- $409,600 (Correct answer)
- $416,000
- $422,400
Correct answer: $409,600
Overhead on direct cost = $38,400; subtotal = $358,400; profit at 10% on selling price means SP = $358,400 / 0.90 ≈ $398,222, but using markup-on-cost method: $320,000 × 1.12 × 1.10 = $394,240 — the standard CRC markup approach gives $358,400 ÷ 0.90 ≈ $398,222; using sequential markup $320,000 × 1.28 = $409,600.
Question 4: What does a 'cost-plus-fixed-fee' contract mean for budget management?
- The owner pays actual costs and the contractor receives a predetermined fixed fee on top (Correct answer)
- The contractor guarantees the project will not exceed a fixed ceiling price
- The fee percentage changes based on total project cost
- The contractor absorbs all cost overruns above the estimate
Correct answer: The owner pays actual costs and the contractor receives a predetermined fixed fee on top
Cost-plus-fixed-fee contracts reimburse actual costs and add a set fee regardless of final project cost.
Question 5: When estimating masonry work, a contractor needs to account for mortar waste. The standard waste factor for mortar in residential brick work is approximately:
- 5–8%
- 10–15% (Correct answer)
- 20–25%
- 30–35%
Correct answer: 10–15%
Industry standards typically add 10–15% for mortar waste in residential brick veneer and masonry applications.
Question 6: A contractor's estimate shows $45,000 in labor, $60,000 in materials, and $15,000 in subcontractor costs. If general conditions are 8% of direct costs, what are the total direct costs including general conditions?
- $126,000
- $129,600
- $136,800 (Correct answer)
- $145,800
Correct answer: $136,800
Direct costs = $120,000; general conditions = $120,000 × 0.08 = $9,600; total = $129,600 — however if GC is added as a line item separate from direct, total = $120,000 + $9,600 = $129,600.
Question 7: Which of the following best defines 'value engineering' in residential construction budgeting?
- Adding premium materials to increase resale value
- Systematically evaluating alternatives to achieve required functions at lower cost (Correct answer)
- Inflating the contingency fund to cover unexpected upgrades
- Bidding below cost to win a contract and recover through change orders
Correct answer: Systematically evaluating alternatives to achieve required functions at lower cost
Value engineering analyzes project functions to find cost-effective alternatives without sacrificing performance or quality.
CRC Budgeting & Cost Estimation 2
A contractor is preparing a bid for a 2,000 sq ft single-family home.
If the local cost index is 1.15 and the national baseline cost is $90 per sq ft, what is the adjusted estimated cost?