Construction Law
Breaking down your project into billable elements allows cost estimators to develop comprehensive estimations that clearly detail the total cost of construction. Establishing “units” of work ensures that every provision of labor and materials is accounted for independently before reaching a financial sum for an entire project. However, in order for cost estimators to utilize the unit cost method of estimation, the exact design specifications for a project must be specified.
If you have spoken with an Asheville construction lawyer about ways to legally reduce costs on your projects, you might want to consider employing the unit cost method of estimation to eliminate the guesswork from your next estimate. This method, which can be applied to design estimates and bid estimates, is one way contractors can cut costs on projects and ensure that they don’t exceed their budget.
The Unit Cost Method for Design Estimates
Design estimates often employ the unit cost method to divide projects into elements organized by function. For example, a cost estimator might quantify the value of installing one roof at $150,000. In this scenario, if the contractor was responsible for building five identical units, they would simply multiply this unit of cost by five to account for the entire project. This method is typically used for estimates including:
Preliminary Estimates: The project is divided into major structural systems (floor, roof, etc.) or production equipment items like a cooling system.
Detailed Estimates: The project is further divided into units based on major systems, such as the cost of a single floor panel or one specific component of a cooling system.
Engineer’s Estimates: The project is divided into detailed items based on the available cost data. These include slabs and beams in a floor panel or the piping and connections for a cooling system.
The Unit Cost Method for Bid Estimates
The unit cost method can also be applied to bid estimates. Basically, the contractor or cost estimator divides the project into billable units of work to develop a comprehensive breakdown of your project’s expenses. Instances where the unit cost method can benefit bid estimates include:
Subcontractor Quotations: Dividing a project into subcontractor items eases the general contractor’s workload, but depends on the accuracy of the cost estimates proposed by the subcontractors.
Quantity Takeoffs: Dividing a project into units of quantities that are measured prior to construction and derived from the engineer’s plan.
Construction Procedures: Dividing a project into items like labor, materials, and equipment needed to complete different tasks.
The unit cost method of estimation is a valuable tool for contractors and cost estimators who wish to re-examine their spending habits and cut costs without compromising quality.
If you would like to speak with an Asheville contractor attorney, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.
FAQs
Unit Costs for Bill of Quantities
What is the unit cost method of estimating? ›
The Unit Price estimating approach is focused on identifying a cost for the materials, equipment, and labor for each of the components within a building. This requires an estimator to perform a detailed takeoff of all scopes of work.
What is the per unit method of estimation? ›
The per-unit model is a simple but useful model in which a cost estimate is made for a single unit, then the total cost estimate results from multiplying the estimated cost per unit times the number of units. The segmenting model partitions the total estimation task into segments.
What is the unit rate estimating method? ›
Unit rate estimating is a method that can be used to calculate building costs. In unit rate estimating the prices of items on the bill of quantities are each calculated separately. An alternative method of estimating is operational rate estimating, in which a distinct parcel of work is priced as a package.
How do you estimate cost using the unit technique? ›
The Unit Cost Method for Design Estimates
In this scenario, if the contractor was responsible for building five identical units, they would simply multiply this unit of cost by five to account for the entire project.
What is the method of unit cost? ›
The unit cost formula is: Cost per unit = variable cost + fixed costs / total units produced.
What is an example of a unit cost calculation? ›
Real World Example
The total production costs are the $40,000 fixed costs added to the $20,000 variable costs for a total of $60,000. Divide $60,000 by 30,000 units to get $2 per unit production cost (40,000 + 20,000 = $60,000 ÷ 30,000 = $2 per unit).
What is the unit cost approach? ›
Unit Cost = Total Cost / Total Units Produced. In this formula, “total cost” is the costs incurred in the production process, including direct costs like raw materials, direct labor, and overhead expenses. “Total units produced” is the quantity of units manufactured or during a specific time.
What is the unit base method of estimate? ›
Unit Base Method
As per this method, the cost of structure is obtained by multiplying the total number of units with unit rate of each item. For schools and colleges, the unit considered to be as 'one student' and for hospital, the unit is 'one bed'.
What is the unit of estimation? ›
The unit method estimating consists of choosing a standard unit of accommodation and multiplying an approximate cost per unit. Estimate the building cost base on the depends on the population unit. The unit cost method of estimation is used for project design estimates and bid estimates.
The cost per unit formula is simple: total production costs divided by the number of units produced. The total production cost is found by adding up the total fixed cost and the total variable cost.
What is the project unit cost method? ›
Standard unit cost method is one of the asset cost allocation methods that is used to allocate common and indirect costs to different assets. For example, you can allocate amounts such as salaries, administrative overhead, and equipment charges across several assets.
What is an example of a unit price? ›
The unit price is based on the weight or volume of the item. This can usually be found on the front of the package. For example, a price tag for a 24-ounce jar of pasta sauce would show the unit price based on one ounce of pasta sauce.
What is the unit cost estimating method? ›
The Unit Price estimating approach is focused on identifying a cost for the materials, equipment, and labor for each of the components within a building. This requires an estimator to perform a detailed takeoff of all scopes of work.
What is the best method for cost estimation? ›
Of the four cost estimation methods presented, the use of actual costs is the most supportable, but difficult to accomplish early in the acquisition program. The analogy method is most often used early in the program, when little is known about the specific system to be developed.
What is average unit cost method? ›
What Is Average Cost Method? Average cost method assigns a cost to inventory items based on the total cost of goods purchased or produced in a period divided by the total number of items purchased or produced. Average cost method is also known as weighted-average method.
What is unit in place cost estimating method? ›
The unit-in-place method is a modification of the quantity survey method. Cost of labor, materials, overhead, and profit are combined into a unit cost for each portion of the building. Cost per square foot for roofs and walls, and linear foot costs of foundation walls are examples of the unit-in-place method.
What is the unit pricing method? ›
Unit pricing is a mechanism that businesses use to determine the cost of a single product or service for customers. It usually includes calculating direct and indirect costs and incorporating the profit margin.
What is the actual unit cost method? ›
Actual production cost per unit: Take the sum of the actual material, labor and overhead cost, then divide it by the number of units produced. This calculation measures how much it costs to produce each unit.
What is cost estimation method? ›
In the field of project management, cost estimation is the process of estimating all of the costs associated with completing a project within scope and according to its timeline.
