2-1 Basic Estimating Problem
Your company is installing a new piece of machining equipment and a robotic arm. Your manager asks for the project costs by cost category as well as the total amount. Given the following information, develop a base cost estimate by grouping costs by Equipment / Material (items 1 – 4), Installation / Labor (items 5 and 6), and Overhead (items 7-9).
1. Two pieces of equipment costing $ 15,000 and $ 35,000
2. Material required for electrical hook-up is 400 feet at $ 25 per foot
3. Controls for each piece of equipment are estimated at $ 600 each
4. Required start-up material is 3,700 pounds at $ 2.70 per pound
5. Company labor for installation requires two maintenance specialists for two days at eight hours per day and $ 35 per hour
6. Contract labor is estimated at a fixed price of $ 7,500
7. Engineering is estimated to be 15% of (equipment / material) cost based on past experience
8. Inspection is estimated to be 3% of (labor) cost based on past experience
9. General and Administrative expenses are estimated to be 5% of the total of (equipment / material) and (labor) based on past experience.
Note: For this problem, only items 5 and 6 are considered "labor" for the purpose of calculating items 8 and 9.
Check answer: Total project cost = $94,737.60
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