BCGBC4005A Produce labour and material schedules for ordering

Apply contract conditions to schedules

Changes to contracts

A prime cost sum scenario

Henry (the client) hires Terry (the builder) to construct a home. Henry gives the builder all the plans and specifications. Terry uses this information to prepare a quote for Henry.
When Terry is preparing a quote for the job he notices that no bathroom fittings or kitchen appliances have been specified. 
Question 1
What should Terry do?
A.     	Contact Henry to request information on the chosen items
B.     	Put in a price for Henry
The correct answer is A. It's important to let the client know that if they are going to choose a prime cost item later on they may need to pay any price difference.
Question 2
What will Terry do next?
A.     	Put a prime cost sum table in the contract
B.     	Write the estimated cost in the contract
The correct answer is A. This makes it clear for everyone to see what the estimate is.
a table is shown with the column headings 'Item', 'PC sum in contract', 'Actual cost in contract' and 'Cost difference'. The first row is 'Basin taps' with the PC sum of $100, actual cost of $130 and cost difference of $30.
To find the cost difference, subtract the PC sum from the actual cost. For the basin taps example the actual cost is $130 minus the PC sum of $100, which equals $30.

Question 3
Calculate the cost difference for the following items:
A. 	Shower taps – PC sum is $150 and actual cost is $120
B.	Shower bases – PC sum is $250 and actual cost is $265
C. 	Stove – PC sum is $900 and actual cost is $1,200
D.	Oven – PC sum is $1,500 and actual cost is $2,500
E.	Range hood – PC sum is $500 and actual cost is $900
F.	Shower screen – PC sum is $400 and actual cost is $350
The correct answers are:
A. 	-30
B. 	15
C. 	300
D. 	1,000
E. 	400
F. 	-50
The next table extends the previous table to include three additional columns: 'Quantity', 'Builder's profit margin' and 'Contract price variation'.
To calculate the contract price variation, multiply the cost difference by the quantity and also by the builder's profit margin. Note that a 20% profit margin is expressed as a multiplier of 1.2, a 30% profit margin is expressed as 1.3.
For example, the contract price variation for four basin taps is: 30 x 4 x 1.2 = 144. 
Question 4
Use your cost difference answers from the previous question to calculate the following contact price variations. If the cost difference is negative, the profit margin is not applicable so just use the total cost difference.
A. 	Shower taps – quantity is 2 and the builder's profit margin is not applicable
B. 	Shower bases – quantity is 2 and the builder's profit margin is 20%
C. 	Stove – quantity is 1 and the builder's profit margin is 20%
D. 	Oven – quantity is 1 and the builder's profit margin is 20%
E. 	Rangehood – quantity is 1 and the builder's profit margin is 20%
F. 	Shower screen – quantity is 2 and the builder's profit margin is not applicable

The correct answers are:
A. 	-60 
B. 	36
C.  	360
D.	1,200
E. 	480
F. 	-100
When the cost of the item is less than the PC sum amount, the price difference is refunded to the client. The amount a builder would refund is a negative number. The contract price variation is refunded at the next progress payment.

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