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There are different types of cost estimates including "Rough Approximation" of cost which can be a conceptual design, preliminary design and then a detailed estimate or quote.

Rough Approximation

The rough approximation is really prepared for informational purposes only.   This type of estimate may not have geometry or even materials but just a rough idea of the product.  This type of estimate would be used if someone is asking for a price to make a building of a certain square size or a box, etc.  A lot of times this would result in prices like \$200 per square foot or \$20 per pound.  Some examples of rough cost estimating would be highway costs per mile, weight of the object for shipping or linear foot cost to build cabinets.  This type of estimate and quoting can be good for a software system designed with CRM and quick estimating features where you would just type in costs.

http://mie-solutions.com/mie/index.php/crm_quoting_estimating_software.html

Preliminary Design

The preliminary design approach is similar to the rough cut estimate but you will know the materials.  This is basically a function  where you would cost out the materials and multiply it by some factor.  The factor you would use would be based on some variable of labor.  For example, to make a casting you would have a material and approximate weight.  You would take (Material * Weight * Price Per Unit Weight)*(Labor Factor).  The labor factor would adjust the price based on passed experience or similar jobs.  A CRM package with a good quoting system would be an ideal candidate for this type of cost estimate.

Detailed Estimate or Quote

A detailed cost estimate is one that fully details out the exploded bill of materials and labor.  Each component of the bill of materials is cost individually in order to arrive and a very accurate cost.  The labor is still a best guess in most situations but there are standards which may be followed to make the quote more accurate.   Example would be quoting jobs which require multiple labor steps to complete.  Even with automation, the labor step with is critical to quote accurately.  The end result of a detailed estimate or quote is a fully exploded bill of materials with labor which can be evaluated.  The larger and more complex the work is the more critical it is to have accurate quotes.  The goal is to create accurate, timely and consistent quotes.  Using a software package like MIE QuoteIt will improve accuracy, time and effort and consistency.

http://mie-solutions.com/mie/index.php/MIE-QuoteIt-Quoting-and-Estimating-Software/product-mie-quoteit-pro.html

MIE QuoteIt from MIE Solutions offers free quoting software for step by step quoting.  The quoting software is very user friendly and offers customization of operations, materials, formulas and even table lookups.   Please visit our website and take a tour of the free quoting software instead of the old method of quoting in excel.

http://www.mie-solutions.com