Question 1

A quantity takeoff in construction estimating refers to:

Accepted Answer

A quantity takeoff (QTO) is the process of measuring and counting all materials, labor, and equipment required for a project based on the construction drawings and specifications. It is the foundation of any cost estimate.

Question 2

Overhead costs in a contractor's estimate include:

Accepted Answer

Overhead includes general and administrative (G&A) costs that support the business but are not directly attributable to a single project. These include office expenses, vehicles, insurance premiums, and management salaries.

Question 3

A contractor's markup (profit and overhead) is typically applied to:

Accepted Answer

Markup for overhead and profit is typically applied to the total direct project cost (materials, labor, equipment, and subcontractor costs). The combined markup percentage must cover G&A overhead and provide the desired profit margin.

Question 4

A Schedule of Values (SOV) is used in construction to:

Accepted Answer

A Schedule of Values breaks the total contract amount into line items that represent the value of individual work elements. It is used as the basis for processing progress payment applications (AIA G702/G703 format).

Question 5

Workers' compensation insurance is required to:

Accepted Answer

Workers' compensation provides medical treatment and wage replacement for employees injured during the course of employment. Most states require contractors to carry workers' comp. Failure to do so can result in loss of license.

Question 6

Which financial statement shows a contractor's assets, liabilities, and equity at a specific point in time?

Accepted Answer

The balance sheet shows the company's financial position at a specific date: Assets = Liabilities + Owner's Equity. The income statement shows revenues and expenses over a period; the cash flow statement tracks cash inflows and outflows.

Question 7

A performance bond protects the owner by ensuring that:

Accepted Answer

A performance bond is issued by a surety company guaranteeing that if the contractor fails to complete the contract, the surety will arrange completion or pay the owner up to the bond amount. It protects the owner from contractor default.

Question 8

Overbilling (front-loading) on a Schedule of Values is when the contractor:

Accepted Answer

Front-loading (overbilling) occurs when the contractor inflates the value of early-completion line items in the Schedule of Values to receive more cash earlier. While common, excessive front-loading creates risk for the owner.

Question 9

The purpose of a payment bond is to:

Accepted Answer

A payment bond guarantees that subcontractors and suppliers will be paid for their work and materials even if the general contractor fails to pay them. It protects lower-tier parties and prevents mechanic's liens on public projects.

Question 10

General liability insurance for a contractor covers:

Accepted Answer

General liability (GL) insurance covers claims for bodily injury to third parties (not employees) and property damage caused by the contractor's operations. Workers' compensation covers employee injuries; builder's risk covers the project itself.

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