INTERESTED FINAL # CALCULATION

[Alwayslearningelec]

Ok, I sat in on a estimate review. usually the final TOTAL COST is marked up with overhead and profit anywhere from 10-20%. Instead of doing it that way this time they took each value(total material, equip, labor) and marked each one up anywhere from 10-15% and used the final number as the TOTAL. Needless to say the total came out to A LOT less than when computed the normal/regular way. Do you see anything woring with this approach? The number still came out more than the cost...just not as much as adding the OH&P to the big FINAL COSt number

 

[charlie b]

Adding 20% to a number that is the sum of smaller numbers is going to be higher than adding 10% to each of the smaller numbers and then adding those together. Speaking in general, 20% is higher than 10%. :happyyes:

But if you added the same percentage to each and every value, then it would not matter if you did it at the end, or at each step along the way. It is called the "distributive property of multiplication over addition."

 

[Strife]

100+10%=100+10=110
(50+10%)+(20+10%)+(30+10%)=(50+5)+(20+2)+(30+3)=55+22+33=110. Same 110. Your problem probably is here:
(50+5%)+(20+10%)+(30+6%)=(50+2.50)+(20+2)+(30+1.80)=52.50+20.20+31.80=104.50

And YES, I'd have a big problem with that approach especially if it's "the lowest price estimate". If your price is the lowest, I wouldn't even give them a breakdown.
But even on a cost + profit I still see a big problem with that.
For instance, let's say you have a a job with very, very high rental equipment.
Let's say you figure time and material at 50K and rental at 50K (for whatever reason. I know I'm skewing the numbers here just to make a point).
So..... rental takes 5 minutes to call and schedule..... it stand to reason:"why would you really need 5K profit and 5K overhead for 5 minutes?"
And I'm sure that's how they ripped your OH & profit apart:"Come one, it's really no effort to do that, do you really expect us to pay you 10K for a phone call?"
And you nod your head in agreement. And 2 weeks in the job somehow the schedule gets delayed by a week, so now you have an extra week to pay for that equipment. Are they gonna pay for it? HA HA HA, they gonna tell you that's the price you gave them.

Ok, I sat in on a estimate review. usually the final TOTAL COST is marked up with overhead and profit anywhere from 10-20%. Instead of doing it that way this time they took each value(total material, equip, labor) and marked each one up anywhere from 10-15% and used the final number as the TOTAL. Needless to say the total came out to A LOT less than when computed the normal/regular way. Do you see anything woring with this approach? The number still came out more than the cost...just not as much as adding the OH&P to the big FINAL COSt number

 

[ritelec]

and profit anywhere from 10-20%.

Profit?????? What's that? :huh:

 

[Alwayslearningelec]

100+10%=100+10=110
(50+10%)+(20+10%)+(30+10%)=(50+5)+(20+2)+(30+3)=55+22+33=110. Same 110. Your problem probably is here:
(50+5%)+(20+10%)+(30+6%)=(50+2.50)+(20+2)+(30+1.80)=52.50+20.20+31.80=104.50

And YES, I'd have a big problem with that approach especially if it's "the lowest price estimate". If your price is the lowest, I wouldn't even give them a breakdown.
But even on a cost + profit I still see a big problem with that.
For instance, let's say you have a a job with very, very high rental equipment.
Let's say you figure time and material at 50K and rental at 50K (for whatever reason. I know I'm skewing the numbers here just to make a point).
So..... rental takes 5 minutes to call and schedule..... it stand to reason:"why would you really need 5K profit and 5K overhead for 5 minutes?"
And I'm sure that's how they ripped your OH & profit apart:"Come one, it's really no effort to do that, do you really expect us to pay you 10K for a phone call?"
And you nod your head in agreement. And 2 weeks in the job somehow the schedule gets delayed by a week, so now you have an extra week to pay for that equipment. Are they gonna pay for it? HA HA HA, they gonna tell you that's the price you gave them.

Not my estimate someone I was helping so basically it is the OH&P being cut drastically from say 25% to about 10%. Would you take a job at 15% above cost .... Well I guess it depends how big a job... Correct?