Q. What does provisional cost mean?
A provisional sum is defined as ‘an estimate of the cost of carrying out particular work (including the cost of supplying any materials needed for the work) under a domestic building contract for which a builder, after making all reasonable enquiries, cannot give a definite amount at the time the contract is entered …
Q. What is the difference between a PC sum and a provisional sum?
They both relate to estimates made for certain costs in the absence of exact figures. For more information see: Prime cost sum. A provisional sum is an allowance, usually estimated by a cost consultant, for a specific element of the works that is not yet defined in enough detail for tenderers to accurately price.
Q. What is the difference between provisional sum and provisional item?
A PC item is an amount of money included in a contract sum to purchase a specified item such as tiles, taps, doors or bathroom fittings. A provisional sum is an amount of money included in the contract sum to cover work or materials, or both, the extent of which cannot be specifically detailed when entering a contract.
Q. What is prime cost in building contract?
A prime cost item is an allowance in the contract for the supply of necessary items not yet finally selected, for example taps or door furniture.
Q. What’s a prime cost?
Prime costs are a firm’s expenses directly related to the materials and labor used in production. It refers to a manufactured product’s costs, which are calculated to ensure the best profit margin for a company.
Q. What is a prime cost sum ‘? How and why it is used in a construction project?
A prime cost sum is the cost of an item that has either not been selected or the price was unknown at the time the contact was entered into. The builder must make a reasonable allowance in the contract for this item.
Q. What are the prime costs?
Prime costs are a firm’s expenses directly related to the materials and labor used in production. The prime cost calculates the direct costs of raw materials and labor that are involved in the production of a good. Direct costs do not include indirect expenses, such as advertising and administrative costs.
Q. How do you calculate prime cost?
How to Calculate Prime Costs
- Direct Labor + Direct Material = Prime Costs.
- Direct Labor + Manufacturing Overhead = Conversion Costs.
- Beginning DM Inventory + DM Purchases – Ending DM Inventory = Direct Material Used.
- Direct Labor + Direct Material = Prime Costs.
Q. What are prime costs?
A prime cost is the total direct costs of production, including raw materials and labor. Indirect costs, such as utilities, manager salaries, and delivery costs, are not included in prime costs. Businesses need to calculate the prime cost of each product manufactured to ensure they are generating a profit.
Q. What is a provisional item in a contract?
Provisional sum items in a building contract are elements of the project that cannot be precisely costed in advance. The builder will include a “provisional” amount in the contract based on their best estimate, and the final cost will be adjusted once the work is complete.
Q. What are examples of prime cost?
The cost of labor and payroll taxes used directly in the production process are part of prime costs. Labor that is used to service and consult the production of goods is also included in prime costs. Direct labor examples might include assembly line workers, welders, carpenters, glass workers, painters, and cooks.
Q. What is defined provisional sum?
Defined provisional sums are those that are sufficiently well defined and/or detailed to allow the contractor to make allowances for them in their programming, planning and pricing preliminaries. The NRM provides guidelines on details to be included within a contract for provisional sums to be categorised as “defined”.
Q. What’s the difference between prime cost and provisional sum?
Most simply, prime cost applies to items themselves, provisional sums refers to complete works. If you do have prime cost items or provisional sums in your contract, the Domestic Building Contracts Act 1995 states that they must be set out in a separate document that includes:
Q. How does mark up affect prime cost sum?
The main contractor is entitled to add mark up and attendance costs to the allowance. If the main contractor’s actual costs then turn out to be higher, the contract sum is increased, and if the main contractor’s actual cost is lower, the contract sum is reduced. For more information see: Prime cost sum .
Q. Why do I need a Prime Cost Allowance?
Prime Cost allowances can be used to allow clients to choose the product to be included and its quantity at a later date in the design and development process, or as a price guide if there is insufficient information provided to facilitate calculation.
