Week 8 - Know the costs of a project Flashcards
Fixed costs
COSTS THAT OCCUR AND DO NOT VARY BASED ON THE LEVEL OF OUTPUT
MORE TIME RELATED OBLIGATIONS
Examples of fixed costs.
OFFICE LEASE
OFFICE UTILITIES
MARKETING FEES
INSURANCE
TAXES
MANAGEMENT SALARIES
Variable costs
COSTS THAT VARIES DEPENDING ON THE LEVEL OF OUTPUT
USUALLY DIRECT COSTS THAT OCCUR IN ORDER TO EXECUTE THE JOB
Variable costs examples
DIRECT LABOUR HIRED ON JOB SITE
RAW MATERIAL
SUPPLIES
INTEREST ON OPERATING LOANS
COMMISSIONS
SUBTRADE CONTRACT
Project Costs
DIRECT COST
OVERHEAD RECOVERIES
Direct cost
DIRECT TRADE AND SUBTRADE COSTS
DIRECT PO MATERIAL AND SUPPLIES PURCHASES
PERMITS AND UTILITIES
EQUIPMENT RENTAL AND CASUAL LABOUR
GENERAL CONDITIONS
Determine personnel charges
DIRECTOR
PROJECT MANAGER
SITE SUPERINTENDENT
PROJECT COORDINATOR
ACCOUNTING / ADMIN PERSONNEL
Determine fixed costs
SALARIES
BENEFITS
WCB
TAX REMITTANCE (EMPLOYER BURDEN)
Determine overhead allocations
OVERHEAD ALLOCATION TO EACH INDIVIDUAL TO DETERMINE THE MINIMAL BURN RATE
SAMPLE CALCULATION
Profit can be derived from two separate areas
GENERAL CONDITION PER JOB
FEES
General condition
ITS PROJECT MANAGER OVERSEES TWO JOBS, HIS BURDEN IS SHARED AMONG TWO JOBS. HIS MONTHLY BURDEN IS REDUCED TO HALF.
THE MORE PROJECTS THAT CAN SHARE PERSONNEL COSTS, THE LOWER THEIR BURDEN IS TO THE COMPANY.
Fees
THE MORE A PROJECT CAN RECOVER OVERHEAD, THE MORE NET FEE IS EARNED FOR THE COMPANY
Operating line
TO COVER THE GAP BETWEEN CUSTOMER CASH RECEIPTS AND VENDORS’ PAYMENTS
Vendor payment terms
COMMON VENDOR TERMS CAN RANGE FROM 15 TO 60 DAYS
Finances impact
OPERATING LINE
VENDOR PAYMENT TERMS
COLLECTION OF CUSTOMER PAYMENT
FINANCING COSTS
EQUIPMENT RENTAL OR LEASE EVALUATION
CASH INVESTMENT
