Before you begin
A completed project or the sample below, a time log, and your cost categories. All dollar figures are illustrative, not suggested rates.
What this lesson covers
- List the job costs and include each overhead cost once.
- Distinguish markup on cost from margin on selling price.
- Use a difference between estimated and actual costs to revise a future estimate.
Recommended preparation
01 / Key concepts
How it works
An estimate records the expected cost of a job. A quote sets out the work and price for the client. Comparing the estimate with actual material use and labor shows where future pricing needs adjustment.
- Markup
- Profit contribution expressed as a percentage of the selected cost base.
- Margin
- The difference between price and the selected cost base, expressed as a percentage of price.
Build the cost base before choosing the selling price
Define the scope, then list current material costs, labor, overhead, waste, delivery or installation and allowances for uncertainty. Keep each cost identifiable so it can be checked against the finished job.
Make scope and next steps easy to understand
A quote should make the deliverable, assumptions, exclusions, timing, and next decision clear. That protects both sides from treating an early estimate as an unlimited promise.
Use actuals to improve the next job
After completion, compare the estimate with material consumed, hours worked, rework and customer changes. Separate estimating errors from added scope before updating the next quote.
Key points
- An estimate records expected job costs. A quote gives the client the scope, price and terms.
- List materials, waste, labor, overhead and risk allowances before adding planned profit.
- Compare estimated and actual costs to improve future pricing.
02 / Worked example
A 25% markup is not a 25% margin
Illustrative cost: $200 materials + $240 labor + $60 allocated overhead = $500. Assume labor does not already include that overhead. Fees, taxes, and other costs are outside this example.
| Method | Calculation | Result |
|---|---|---|
| 25% markup | $500 × 1.25 | $625 price |
| Margin at that price | ($625 − $500) ÷ $625 | 20% |
| 25% target margin | $500 ÷ (1 − 0.25) | $666.67 price |
| Actual cost rises to $550 | ($625 − $550) ÷ $625 | 12% margin at original price |
Compare markup with margin
Keep cost constant. Predict which formula produces the higher price for the same percentage.
Enter the job cost with each expense included once. This example does not add taxes, selling fees or any costs you have left out.
Markup multiplies cost by 1 + 25/100. Target margin divides cost by 1 − 25/100. Markup is based on cost; margin is based on selling price.
03 / Workshop exercise
Apply the method
Work through the drawing or setup review first, then use a sample that matches your project. Check the equipment and safety requirements above before starting any machine work.
- Choose a recent small project and rebuild its estimate line by line.
- Write the client-facing scope, assumptions, exclusions, and next step in plain language.
- Compare the planned hours and material with the actual job, then name one change for the next quote.
Common mistakes
- Pricing only the visible bench time.
- Treating a verbal estimate as an unlimited scope promise.
- Completing a job without recording the rework, waste, or change requests that reduced margin.
Take it further
Build a variance table with planned cost, actual cost, cause, and one corrective action. Distinguish changed scope, rework, material price, and slow production.
Workshop checklist
Use this topic checklist alongside your machine’s full setup procedure.
- Define the deliverable, exclusions, revision boundary, and timing assumptions.
- List materials, waste, labor, overhead and allowances for project risks.
- Turn the estimate into a quote with clear client-facing scope.
- Track actual material, hours, rework, and change requests during the job.
- Review estimate versus actuals before reusing the same price baseline.
04 / Review questions
Review the key decisions
Consider each question, then compare your answer with the explanation. Return to the worked example whenever you need it.
1. A loaded hourly rate already includes shop overhead. Should the same overhead be added again?
View hint
Check which costs are already included in the rate.
View explanation
No. Identify what the rate includes and avoid duplicating the same cost. Add only costs not already recovered by the chosen rate or another line.
2. Actual labor exceeded the plan because the client added a feature. Should the original task time simply be increased?
View hint
Separate scope change from estimating error.
View explanation
Record the additional work separately. Compare the original scope with its actual time before changing the estimate for similar work.
05 / Project notes
Notes for your next project
Check off the topics you have reviewed and record anything useful for your next build. This tracks your learning progress; use your equipment’s setup procedure for machine checks.
Record: Scope, cost lines, quote total, assumptions, actual labor, material use, waste, change requests, final result, and next pricing adjustment.
No notes recorded. Use this space for your observations.
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Check each topic above to mark the lesson as reviewed. You can browse any lesson at any time.
Related calculators
Use your project measurements and costs in the calculators below. Check the results against the stock, equipment and requirements of the job.
Practice with a complete project
Apply the lesson to measured dimensions, then keep the drawing, material list and build checks together.
Sources & further study
WoodWorkCalc writes the exercises and illustrative examples. Named historical cases are attributed separately. These sources support the principles identified in the lesson; their publishers do not endorse WoodWorkCalc. Guidance and platform features can change. Sources retain their own copyright and licensing terms.
- Woodwork Career Alliance of North America — Skill Standards Overview (opens new tab)
Public overview of competency-based woodworking skill standards and progressive learning.
Woodwork Career Alliance of North America. Skill Standards Overview. Accessed September 2026.