Types of Cost Estimates in Construction A cost estimate is predicted expenditure of a project which is generally prepared before the project is taken up. It is prepared in different types based on the requirement of project.The construction cost estimates can be prepared either in a detailed manner by taking into consideration item by item or can be calculated approximately without going much into the details. Based on these criterias, there are mainly 8 cost estimates followed in construction Preliminary Cost Estimate Plinth Area Cost Estimate Cube Rate Cost Estimate Approximate Quantity Method Cost Estimate Detailed Cost Estimate Revised Cost Estimate Supplementary Cost Estimate Annual Repair Cost Estimate 1. Preliminary Cost Estimate The preliminary cost estimate is also called an abstract cost estimate or approximate cost estimate or budget estimate. This estimate is generally prepared in initial stages to know the approximate cost o...
Difference between Standard and Estimated Cost
Estimated costs are intended to ascertain what the costs will be while standard costs aim at what costs should be. However, both estimated costs and standard costs are related to future period of time but there are some significant differences between them. Some major differences between standard costs and estimated costs are listed below:
Standard Cost
- Standard costs, on the other hand, are ascertained on a scientific basis keeping in view certain conditions of efficiency.
- Standard costs are based upon standard rates that are carefully developed and set as scientifically as possible.
- Standard Cost is not generally revised unless it has been set incorrectly or it has become irrelevant to the changed situations.
- Standard costs are used by those organizations that follow standard costing.
- Standard costs are fixed after scientific analysis of relevant cost elements.
- Standard costs are based upon specifications.
- Main purpose of standard costs is to serve as a tool for cost control.
- Standard costs are planned costs which are determined by technical experts after considering levels of efficiency and production
Estimated Cost
- Estimated costs are calculated on the basis of past performance being adjusted in the light of anticipated changes in the future.
- Estimated costs are the expressions of opinion based upon experience.
- Estimated cost is adjusted to the actual cost and expected changes in the coming period.
- Estimated costs are used by those firms that follow historical costing system.
- Estimated costs are based on actual costs and anticipated costs.
- Estimated costs are based on approximation.
- Estimated costs are normally used as guideline for price determination, quoting the selling price etc.
- Estimated costs are determined by taking into consideration the historical data as the basis and adjusting it to future trends.
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