PSI NASCLA Practice Exam 2025 – Complete Exam Prep

In cost-based pricing, the total cost of a project is calculated by combining the cost estimate with both overhead expenses and the profit margin. This approach ensures that all expenditures related to the project, including direct costs like materials and labor, as well as indirect costs such as administrative expenses and overhead, are accounted for. The profit margin is the additional amount added to ensure that the business remains viable and can sustain its operations while providing a return on investment.

By using this comprehensive method, the contractor ensures that the pricing reflects the actual expenses incurred during the project while also contributing to business profitability. It provides a clear and systematic way of determining total costs, making it an essential practice for accurate budgeting and financial planning in construction projects. This is why the option stating the total cost is the cost estimate plus overhead and profit margin is the correct choice in this context.