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Materials with an allowance, labor and overhead from the hours, a markup or a margin on top, what a quote should say, and the job measured against its quote afterwards.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will cost a single job from its materials and hours, with labor and overhead applied to the same hours, and turn that cost into a quote by a markup or a margin. You will also say what an accepted quote commits the business to, and measure a finished job's profit against the quote.
You can cost a unit that is made over and over, spread overhead by labor hours, cost the owner's own hours at a rate, and turn a cost into a price with a markup or a margin. Many small businesses do not sell the same unit twice. A plumber, a joiner, a caterer, a designer and a builder each price one job at a time, for a customer who wants to know the price before saying yes. This lesson puts the pieces you already have onto one card for one job, turns it into a quote, and closes the loop by comparing the job's real cost with what the quote assumed.
| Term | What it means |
|---|---|
| Job | One piece of work done for one customer, priced on its own. |
| Job card | The sheet that lists a job's materials, hours, rates, total cost and price. |
| Allowance | An amount added to the materials for waste, offcuts and mistakes. |
| Overhead rate | The overhead charged for each labor hour a job takes. |
| Quote | A price offered for a job, which is binding once the customer accepts it. |
| Estimate | A best guess at the price, which may change as the work shows what it needs. |
| Contingency | An amount in the quote for a risk the job may or may not meet. |
| Overrun | Hours or costs beyond what the job card planned. |
A job is priced from the bottom up. Every figure on the card comes from two estimates — how much material, and how many hours — and two rates the business already knows.
Materials, with an allowance. The quantity the job needs, at what it costs, plus a percentage for offcuts, spills and the piece cut wrong. The allowance is not padding; it is material the customer's job really uses.
Labor, from the hours. The hours the job will take at the hourly rate. For an owner doing the work, that is their costing rate — the second sense of owner labor — so the price covers the work in it.
Overhead, from the same hours. The workshop, van, phone and insurance are spread over jobs at an overhead rate per labor hour, worked out as in the overhead lesson. A job that takes twice the hours carries twice the overhead.
$$\text{job cost} = \text{materials} + \text{hours} \times (\text{labor rate} + \text{overhead rate})$$
Price, from the cost. A markup adds a share of the cost; a margin makes a share of the price profit, so the cost is divided by what is left of the price. A 25 percent markup and a 20 percent margin give the same price.
The check, after the job. Write the real hours and materials on the same card. The gap between planned and actual is the best information the business has for its next quote.
This is how to work the number out and read it, not a recommendation about what to charge. What any particular business should do depends on a market nobody here can see, and on rules that differ from place to place.
Another way: steps
Another way: table
A joiner's card for fitting shelves, in dollars.
| Line | Working | Dollars |
|---|---|---|
| Materials | 200 plus 10 percent | 220 |
| Labor | 8 hours at 30 | 240 |
| Overhead | 8 hours at 10 | 80 |
| Cost | 540 | |
| Markup | 25 percent of 540 | 135 |
| Quote | 675 |
Check: 135 is a fifth of 675, a 20 percent margin, and a quarter of 540, a 25 percent markup — the same price said two ways.
Measure before you estimate. Visit, measure and list what the job needs. Most bad quotes start as a price given over the phone for a job nobody has seen.
Estimate hours from records, not from hope. The best source is the job cards of similar jobs, with the hours they actually took. Without records, break the job into tasks and estimate each; a total guessed in one go is nearly always too low.
Cost the materials with an allowance. Five to fifteen percent is common for cut materials; it depends on the trade and is best learned from the business's own cards.
Apply both rates to the same hours. Labor and overhead come from one hours figure. Leaving overhead out is the most common reason a busy tradesperson makes a loss: every job pays its labor, and nothing pays the van.
Add the markup to the whole cost. A markup on materials only leaves the labor and overhead earning nothing.
Write the quote. Say what is included and what is not, how long the price stands, whether a deposit is due, and when payment is expected.
Check the card by working the margin both ways: profit over price should be the margin you meant, and profit over cost the markup. After the job, write the real figures beside the planned ones and find the gap.
A quote is a price. Once the customer accepts it, the business has agreed to do that work for that money, and a job that takes longer costs the business, not the customer. An estimate is a best guess, used where the work cannot be known until it starts — a leak behind a wall, an old wiring run. Which one a document is depends on what it says, so say it plainly.
A clear quote states the scope: what will be done, in what materials, to what finish. It states what is excluded: moving furniture, making good the plaster, removing waste. It states how long the price is valid, because material prices move. It states the payment terms: a deposit, stage payments on a long job, and when the balance is due. And it states what happens if the customer changes the job: a variation is priced separately before it is done.
Where a job carries a real risk — rot that may or may not be there — a contingency can be named in the quote as a separate line, used only if the risk is met. That is fairer to the customer than a price padded for every risk, and it keeps the quote competitive.
The job card becomes useful the second time it is read. When the job is done, write the real hours and the real materials beside the planned ones. The difference, costed at the same rates, is what the job made or lost against its quote.
An overrun of hours is costed at labor plus overhead per hour, because every extra hour uses both. On a fixed price, the whole of it comes off the profit. Three hours over at 40 an hour is 120 less profit, whatever the reason.
Over several jobs, the gaps show a pattern. If kitchens always run a fifth over, the estimate for kitchens is a fifth too low, and the next quote should say so. If materials always come in under, the allowance is too generous and the quotes are less competitive than they could be. A business that keeps its cards and reads them quotes better every month; one that does not repeats the same mistake on every job.
Keep the comparison in the same units the card used. Hours over, costed at labor plus overhead; materials over, at what they cost; and anything the customer added, priced as a variation and billed, not absorbed. Only then does the gap say something about the estimate rather than about a change the customer asked for and the business forgot to charge.
An electrician going self-employed prices her first jobs from memory of what her old employer charged. After three months she has twenty job cards and a bank balance lower than she expected, so she reads them.
Her quotes used labor at 32 an hour and materials at cost, with a 20 percent markup — but no overhead. Her van, tools, insurance, phone and certification cost about 900 a month, and she works about 120 hours a month on jobs, so her overhead rate is 900 ÷ 120 = 7.50 an hour. Every job she did was quoted 7.50 an hour too low before any markup.
Her cards also show that rewiring jobs averaged 26 hours against 20 quoted. On a typical rewire, with materials of 600, the old quote was (600 + 20 × 32) × 1.2 = 1,488. The real cost was 600 + 26 × (32 + 7.50) = 1,627: she lost 139 on each one.
Her new card for a rewire uses 26 hours, both rates and a 20 percent markup: (600 + 26 × 39.50) × 1.2 = 1,952.40. She checks it against what other electricians quote locally, finds it within their range, and writes into every quote what is excluded — making good the plaster — because that was where two of her overruns came from.
Construction firms price large projects with a bill of quantities: every material and task measured and costed line by line, with labor and plant hours, overhead and profit added on top, and named contingencies for known risks. It is the same job card at a larger scale. The firms that survive tend to be the ones that compare every finished project's real costs with its bill, line by line, and feed the gaps into the next tender.
Leaving out the overhead. A quote of materials plus labor pays the owner and the supplier, and nothing pays the van, the tools or the insurance.
Treating the owner's hours as free. Unpaid hours on a quote are a discount nobody asked for.
Adding the markup to part of the cost. Profit on materials only means the hours earn nothing.
Confusing markup and margin. Adding 20 percent to the cost gives a margin of about 17 percent, not 20.
Reading a quote as an estimate. An accepted quote is a price; an overrun is the business's cost unless the quote said otherwise.
Throwing the card away after the job. The real hours are the only honest basis for the next estimate.
Cost the materials: radiator 140, valves and pipe 40.
$140 + 40 = 180$
No allowance on the radiator itself; it is bought whole.
Cost the labor: 4 hours at 35.
$4 \times 35 = 140$
His costing rate, from the owner-labor lesson.
Cost the overhead: 4 hours at 12.
$4 \times 12 = 48$
The van, tools and insurance, spread by labor hours.
Total the job's cost.
$180 + 140 + 48 = 368$
Everything the job uses.
Add a markup of 25 percent.
$368 \times 1.25 = 460$
The quote.
Cost the paint and materials, with a 10 percent allowance on 150.
$150 \times 1.1 = 165$
Paint is always a little more than the tin sums say.
Estimate the hours from two similar rooms: 14 and 16.
$(14 + 16) \div 2 = 15$
Records, not hope.
Cost labor and overhead together at 38 an hour.
$15 \times 38 = 570$
Both rates from the same hours.
Total the cost.
$165 + 570 = 735$
Before profit.
Price for a 30 percent margin: the cost is 70 percent of the price.
$735 \div 0.7 = 1050$
Divide by the cost's share; do not add 30 percent of the cost.
Check the margin.
$(1050 - 735) \div 1050 = 315 \div 1050 = 0.30$
Profit over price is the margin she meant.
Plan the hours: 32 at labor 30 and overhead 10.
$32 \times (30 + 10) = 1280$
The job card's hours.
Add the materials: 900 with a 10 percent allowance.
$900 \times 1.1 = 990$
Worktops and fixings.
Total and mark up by 25 percent.
$(1280 + 990) \times 1.25 = 2270 \times 1.25 = 2837.50$
The fixed price the customer accepts.
Find the planned profit.
$2837.50 - 2270 = 567.50$
What the quote meant to earn.
Record the real hours: 38.
$38 - 32 = 6 \text{ hours over}$
An uneven wall took a day longer.
Cost the overrun at labor plus overhead.
$6 \times 40 = 240$
Every extra hour uses both.
Find the profit the job really made.
$567.50 - 240 = 327.50$
The price was fixed, so the overrun came out of profit; the next kitchen's estimate should allow for old walls.
Cost the hours.
$10 \times (30 + 10) = 400$
Labor and overhead together.
Total the cost.
$300 + 400 = 700$
Before profit.
Add the markup.
A decorator is pricing a job. Put the five steps of her job card in the order they have to be done.
Number the steps in order (write the number in the box):
Complete the worked solution: a job needs $392$ dollars of materials and $12$ hours of work. Labor is costed at $21$ dollars an hour and overhead at $11$ dollars a labor hour. The business adds a markup of 25 percent. What is the quote?
Cost the labor from the hours.
$12 \times 21 =$ l
Hours times the labor rate.
Cost the overhead for the same hours.
$12 \times 11 =$ v
Overhead is spread by the hours a job takes.
Total the job's cost.
$392 + (\text{labor}) + (\text{overhead}) =$ t
Everything the job uses, before profit.
Add the markup of 25 percent.
$(\text{cost}) \times 1.25 =$ q
A markup is a share of the cost added on top.
Check the profit in the quote.
$(\text{quote}) - (\text{cost}) = \text{a quarter of the cost}$
If it is not a quarter, the markup was added to part of the cost only.
A painter is quoting to decorate a hallway. It will take $22$ hours, which she costs at $40$ dollars an hour for labor and overhead together, and $220$ dollars of paint and materials. She prices every job so that 20 percent of the price is profit. What should she quote, in dollars?
Answer:
A tiler quotes a fixed price of $1950$ dollars to tile a bathroom, and the customer accepts it in writing. The quote says nothing about extra hours. The job takes $6$ hours longer than she planned, because she underestimated the cutting. Who bears the cost of the extra hours?
A job was quoted at a fixed price that planned $346$ dollars of profit. It took $3$ hours longer than estimated, and each hour costs $32$ dollars in labor and overhead. How many dollars of profit did the job actually make?
Answer:
A joiner is quoting to fit a run of kitchen shelves. The timber and fixings cost $290$ dollars, and she allows 10 percent extra for offcuts and mistakes. The job will take $8$ hours; she costs her labor at $35$ dollars an hour and her workshop overhead at $12$ dollars a labor hour. She adds a markup of 20 percent. Fill in the job card.
| Amount | |
|---|---|
| Materials with the allowance, dollars | |
| Labor | |
| Overhead | |
| Total cost of the job | |
| Quote at a 20 percent markup |
A caterer is quoting for a party of $120$ guests. Food costs $9$ dollars a guest. Staff will work $15$ hours in all at $15$ dollars an hour, and van and equipment rental comes to $615$ dollars. She adds a markup of 25 percent and quotes a price per guest. Fill in the working.
| Amount | |
|---|---|
| Food for every guest, dollars | |
| Staff hours | |
| Total cost of the party | |
| Cost per guest | |
| Price per guest at a 25 percent markup |
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
A joiner is quoting to fit a run of kitchen shelves. The timber and fixings cost $360$ dollars, and she allows 10 percent extra for offcuts and mistakes. The job will take $19$ hours; she costs her labor at $29$ dollars an hour and her workshop overhead at $7$ dollars a labor hour. She adds a markup of 20 percent. Fill in the job card.
| Amount | |
|---|---|
| Materials with the allowance, dollars | |
| Labor | |
| Overhead | |
| Total cost of the job | |
| Quote at a 20 percent markup |
You can build a job card, turn it into a quote, and find what an overrun cost. Tell someone why a busy tradesperson can lose money on every job while being paid for every hour. Next: choosing between two options on the numbers, and naming what the numbers still cannot settle.
14. Your turn: materials 300, 10 hours at 30 labor and 10 overhead, a 25 percent markup, step 3
$700 \times 1.25 = 875$
The quote.