The Cost Book
Cost Estimation in the Project Management is the process of estimating the cost and other resources needed to complete a project within a defined scope. Cost estimation accounts for each element required for the project and calculates a total amount that determines a project’s budget. It is a very important for the estimator to understand the cost book to meet the requirements from the contractor and client.
1- Production Rate
Production rate is the ratio of quantity and total man hours.
Production Rate = Quantity/Man Days
Production rate depends upon a lot of factors. Because to calculate the man days, production rate should be known. To solve this problem the researchers fixed the production rate on the bases of some factors. Here is the Production rate table:
2- Man Days and Man Hours
Man Days is the ratio of quantity and the product of production rate and man count. Production rate has been discussed in previous point, while the man count is also depend upon the availability of labor and total duration of project.
Man Days = Quantity/(Production Rate x Man Count)
To calculate the man hours multiply the man days and man count to the daily working hours e.g. 8 hours.
Man Hours = Man Days x Working hours x Man Count
3- Unit Labor Cost and Total Labor Cost
Unit labor cost is depend upon the labor rate and the labor rate depends upon the profession of man e.g. operator, mechanic, supervisor etc.
Unit Labor Cost = (Man Hours x Labor Rate)/Quantity
The total labor cost is the product of unit labor cost and quantity.
Total Labor Cost = Unit Labor Cost x Quantity
4- Equipment Cost
The equipment unit rate is fixed for every equipment on hourly base. Total equipment cost is the product of man hours and the unit rate of equipment.
Equipment Total Cost = Man Hours x Equipment Unit Rate
The Unit Cost of equipment is the ratio of total equipment and quantity.
Equipment Unit Cost = Equipment Total Cost/Quantity
5- Unit Cost and Total Cost
The unit cost is the sum of equipment unit cost, unit labor cost and unit material rate. Equipment and labor unit cost has been discussed in previous points while the unit material cost depends upon the region of project.
Unit Cost = Material Unit Cost + Equipment Unit Cost + Unit Labor Cost
The total Cost is the product of unit cost and quantity.
Total Cost = Unit Cost x Quantity
6- Total Markup
Total markup is the sum of total cost and the product of total cost with insurance and overhead & profit. Here contractor expenses, often referred to as Overhead and Profit (O&P) is intended to cover the general contractor’s overhead and operating costs, as well as profit. It is typically estimated at 20% of the total amount of the contractor’s own rebuild or renovation estimate.
Total Markup = Total Cost + (Total Cost x Insurance(%)) + (Total Cost x Overhead & Profit)
7- Unit Price
The Unit Price is the ratio of total markup and quantity.
Unit Price = Total Markup/Quantity