What is a prime cost sum NZ?

A prime cost sum sets aside a fixed amount for a certain item (such as a kitchen sink) so you can choose these yourself. If you choose a product that costs more than the allocated prime cost sum, you will need to pay extra to use these in your home or building.

What is the difference between prime cost and provisional sum?

Traditionally, a prime cost is limited to the cost of supplying the relevant item, and does not include the cost of any work that relates to it (such as its installation). In contrast, provisional sums include allowances for both the supply item and all related work to be performed by the contractor.

What is a PC sum NZ?

PC sums are where you and / or your builder agree to NOT fix a part of your build contract. Avoid or minimize PC Sums. For example, the excavation cost will probably be a PC sum. If during the excavation, the soil is fund to be sub-standard, additional work may be required and this cost is passed on to you.

What are prime cost and provisional sum items?

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: A comprehensive description of the item.

What are the benefits of prime cost sums?

Advantages of Prime Cost A measure of direct costs related to production hence can serve as an important area to focus on for cost control and cost reduction. Helps serve as a base to determine the selling price of a product.

What is prime cost formula?

The prime cost formula is simply expressed as a summation of raw material cost and direct labor cost incurred during the given period of time. Mathematically, it is represented as, Prime Cost = Raw Material Cost + Direct Labor Cost.

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”.

What is Prime cost example?

Let’s say, as an example, a professional woodworker is hired to construct a dining room table for a customer. The prime costs for creating the table include direct labor and raw materials, such as lumber, hardware, and paint. The materials directly contributing to the table’s production cost $200.

How do you calculate prime cost?

To calculate Prime Cost, we have to take figures of raw material consumption and direct cost paid to the workers. In the above example, suppose the company pays 3200 towards direct labor cost out of entire direct expenditures; Formula = Raw Material + Direct Labour = 7500 + 3200 = 10700 Crore.

What do you mean by prime cost explain?

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.

What is the difference between defined and undefined provisional sums?

With undefined provisional sums, the client typically bears the price and scheduling risks. Defined provisional sums are those which have been described in sufficient detail that the contractor is expected to have made allowance for them in their programming, planning and pricing preliminaries.