Construction Cost Model

Pamela Said:

Help: determine a model of a function?

We Answered:

First of all, we should know what the question is asking for: Not a "model of a function." That would be confusing!

All we are asked to do is come up with a "model" -- that is, a mathematical expression describing how much the construction project will cost -- which is much simpler.

We are instructed to express this model as a function C(x), where x = the length of the fence, and C(x) = the total cost.

The enclosed area is a rectangle with length x. Let y = the height of the rectangle.

We know that the area A of the rectangle is 260 square yards. So:

A = xy = 260
=>
y = 260 / x

All four sides of the rectangle will be enclosed, but one of the x-sides will be enclosed by a fence which costs $4 / yd; the other x-side and the two y-sides will be enclosed by wall that costs $18 / yd.

So, the total cost C = the cost of fencing for one x-side, plus the cost of wall for the other x-side and the two y-sides:

C = 4x + 18x + 2 * 18y
= 22x + 36y

However, this makes C a function in both x and y. We want C as a function of only x.

But remember that y = 260 / x

So:

C = 22x + 36 (260 / x)

And now we can express C as a function of x:

C(x) = 22x + 9360 / x

Anne Said:

Is there a simple financial model that can evaluate construction bank loans that allow for...?

We Answered:

I don't think there is a simple model, as both use a different base for their base cost.
However, Prime and LIBOR are different, but in general LIBOR is 2,25 lower than Prime. (has been since around 1990).
The loan fees, you can probably calculate, for the LIBOR and Prime, you could use the figures from last 10 years as a guide.
If rates rise drastically, Prime might become more interesting, as the difference between LIBOR and Prime becomes smaller at higher rates.

You can compare both at this site:
http://www.briefing.com/morningstar/mtgd…

So, I guess Prime +0.5 is 0.5 higher than LIBOR +2.25 if it is 3 month LIBOR you are talking about.
Also compare the fised periods, maximum rise or drop per period, and the fees.
It is a complex picture, but as long as you strick to the main lines, you'll be able to figure it out. If not, don't hesitate to PM me.

Jennie Said:

How to make an offer on new construction home?

We Answered:

It's new construction - there is usually no negotiating. You can try and have them throw in a couple of upgrades, but I doubt they'll pay closing costs.

Beverly Said:

I have a question concerning railroad construction costs concerning trustles--not model but the real thing?

We Answered:

Civil engineering needs you to be an expert in maths and not afraid of hard work. You are talking millions of $$$ for an average bridge. Not to mention the enormous amount of human labour involved. That's why people are reluctant to build new railroads. Fortunately the bridges built by our ancestors are in the main still strong enough.

Greg Said:

how the cost control can be applied to different inventory models in construction industries?

We Answered:

Its better to prepare a budget for expenses for each cost center/project.
For example if we know the no. of cement bags required for the project viz., 3000 bags we can fix the budget by 3000 x 280 (if the current rate is 250 fix an escalation since on completion of the project the price may raise.) So also for all materials. On the other way find out the expenses incurred for the previous year (YOY) for a project & based on its cost this may be also arrived at by adding 7.5% to 10% on each items.Periodical report (MIS) on expenses has to be monitored and consumption also to be checked whether its in line with our budget. If any thing goes wrong extraordinarily check to be made. This riase may be occurred due to certain conditions beyond our control.

Deborah Said:

Anderson Construction assembles residential houses. It uses a job-costing system with two direct-cost categori?

We Answered:

Jef,

I prefer you tried first & then I can help check or suggest what have you done wrong rather than doing your homework.

This is a very basic JOCS problem. You need to understand this one or else you may not understand it.

Put the data into a worksheet & club similar data together & start answering.

1. This is just a simple division
2. Summation of the data with 2 indirect cost rate used. One for normal, the other for actual.
3. Consult your text book, this is a simple explanation & very basic on why organization use normal costing (there's a hint in the problem as well).

Cheers...

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