Five estimating mistakes that cost points and money

1. Using markup as if it were margin

Markup is profit as a percentage of cost. Margin is the same dollars as a percentage of the selling price. They are not the same number.

Worked example. Direct cost is $180,000 and the company needs a 12% margin.

• Right: price = 180,000 / (1 - 0.12) = 180,000 / 0.88 = $204,545.45. Check: 204,545.45 x 0.88 = 180,000.00.
• Wrong: price = 180,000 x 1.12 = $201,600. That is a 12% markup, which is only a 10.71% margin. Check: 21,600 / 201,600 = 0.1071, and 0.12 / 1.12 = 0.1071.

The slip costs $2,945.45 (204,545.45 - 201,600) on one job. On an exam question, $201,600 makes a ready-made wrong option.

Fix: before you multiply, ask "percent of what?" Cost means markup. Price means margin.

2. Mixing units

The classic is a concrete slab with the thickness left in inches.

Worked example. A slab is 60 ft by 40 ft and 6 in thick.

• Right: 6 in = 0.5 ft. Volume = 60 x 40 x 0.5 = 1,200 cubic feet. In cubic yards: 1,200 / 27 = 44.44 cy. Check: 27 x 44 = 1,188, and the remaining 12 / 27 = 0.44, so 44.44 cy.
• Wrong, inches as feet: 60 x 40 x 6 = 14,400 cubic feet, or 533.33 cy, twelve times too much.
• Wrong, cubic feet priced as yards: 1,200 "yards" is 27 times too much.

Fix: convert every dimension to the same unit before you multiply, and write the unit next to every number. A cubic yard is 27 cubic feet because it is 3 x 3 x 3.

3. Adding waste twice, or not at all

Waste belongs in the estimate once, stated as a percentage, on the quantity it applies to.

Worked example. The slab above needs 44.44 cy, and the estimator allows 5% waste. Order quantity = 44.44 x 1.05 = 46.67 cy. Check: 5% of 44.44 is 2.22, and 44.44 + 2.22 = 46.66; the last hundredth is rounding (unrounded, 44.444 x 1.05 = 46.667). Round up to the next whole or half yard your supplier sells.

Two ways to get it wrong:

• Twice: waste added at takeoff and again on the summary sheet. 5% then 5% again is 1.05 x 1.05 = 1.1025, a 10.25% allowance, not 10% and not 5%.
• Never: the net takeoff priced as if not a yard is lost. A no-waste total makes an easy wrong option.

Fix: keep waste in its own column so you can see it once.

4. Pricing labor at the bare wage

The wage is not what an hour of labor costs. Payroll taxes, insurance and benefits, called labor burden, go on top.

Worked example. A carpenter earns $32 an hour and burden is 35% of wages. Burdened rate = 32 x 1.35 = $43.20. Check: 35% of 32 is 11.20, and 32 + 11.20 = 43.20.

A task needs 120 crew hours:

• Burdened: 120 x 43.20 = $5,184.
• Bare wage: 120 x 32 = $3,840.

The gap is $1,344. Check: 120 x 11.20 = 1,344.

Fix: build the burden into the hourly rate before you multiply by hours. On the exam, read whether the stem gives you a wage or a burdened rate.

5. Missing an addendum or a general-conditions cost

Addenda change the bid documents before bids are due. Miss one, and you may price the wrong scope. On many bid forms, failing to acknowledge an addendum can make the bid nonresponsive.

The quieter version is missing what the general and supplementary conditions add: bonds, insurance, temporary facilities, cleanup, a schedule requirement. None of it shows on the drawings, and all of it costs money.

Fix: read the front end before the drawings, list every addendum on the bid form, and keep a checklist of general-conditions items. Reading a bid package like an examiner walks through the order.

Why these five make good exam questions

Each mistake produces a specific wrong number, and that makes a believable wrong option. When your answer matches an option, ask whether a common slip would land on a neighbor. If two options differ by a factor of 27, 12 or 1.0something, one of them is a trap.

Practice them

Take the free 10-question check. It needs no signup and explains every answer, including the arithmetic. For a lesson on Procurement and Contracting with more worked examples and practice questions where every answer is worked, see the plans. The procurement post shows where estimating sits in that area. Free calculators help with the unit and waste slips: board feet, drywall sheets and cut and fill. The cash flow example shows what a priced job does to the bank balance, and the subcontractor buyout post covers locking in sub prices after award.

Sources

• PSI Candidate Information Bulletin 1458, content outline and question counts, updated 7 Jul 2026. Retrieved 5 Nov 2026.
• All examples use invented numbers.

FAQ

What is the difference between markup and margin?

Markup is profit as a percentage of cost. Margin is profit as a percentage of price. A 12% markup is about a 10.71% margin.

How many cubic feet are in a cubic yard?

27, because a cubic yard is 3 ft x 3 ft x 3 ft.

What is labor burden?

The employer's costs on top of the wage, such as payroll taxes, insurance and benefits, usually expressed as a percentage of wages.