Direct Costs

Direct costs is a section of the income statement customarily found in manufacturing and construction. It refers to the physical materials and labor associated with the manufacturing or construction of the project the company is producing. Sales less direct costs is known as the direct margin.

Roofer – Business Dynamics

Roofer

Roofers depend heavily on labor to accomplish their task.  They are also highly susceptible to weather conditions and dangerous situations.  There are a multitude of issues they face.  If properly managed, an owner of a roofing company can make a good living and profit.  Experience is absolutely the best ally for the roofer.

Markup Percentage for Remodelers

Markup Percentage

In the construction industry, remodelers face a different set of criteria than your traditional new home builder.  Because of these issues the markup percentage on costs is generally much higher than other forms of construction.  If you are a remodeler, you need to understand the impact of these issues and how to properly markup your job to cover all your indirect and overhead costs.

Construction Accounting Terminology

Construction Accounting Terminology

In construction accounting accountants and bookkeepers use certain terms and there are distinct meanings associated with these terms.  This article is designed to introduce beginner accountants and contractors to these terms from the perspective of financial reporting.

QuickBooks in Construction Accounting – Transfer Work in Process to Cost of Goods Sold

QuickBooks does not have a seamless subrountine to transfer costs from construction in process control accout to the profit in loss statement’s cost of construction section. Therefore, the accountant has to export data to a spreadsheet and then sum the respective functional costs of materials, subcontractors, labor, land etc. and then make a general journal entry to complete the transfer. This article explains this process in detail.

How to Calculate the Best Markup for a Construction Project

Markup for a Construction Project

Every construction project has costs beyond the direct costs and the contractor wants to earn a profit.  To cover these costs he must have an appropriate markup.  The contractor must give consideration to many variables and circumstances to calculate the best markup for a construction project.  To determine the best markup percentage on costs, the contractor should consider his indirect costs, overhead, taxes, and final profit desired. 

What is a Reasonable Profit in Construction?

Reasonable Profit in Construction

For any company, profit is based on the risk reward concept.  With construction, what should be the profit (reward) given the risk?  What is a reasonable expectation given the industry and the particular business? 

There is no single correct answer.  The construction industry is divided into several significant branches.  This article is focused on the residential contractor. 

From the new home builder to the re-modeler, a reasonable profit given the risk should be no less than 9%  AND this is net after a reasonable salary to the owner for his management role.  This is the take home or actual bottom line profit; the amount after taxes.  How do you derive such a figure?  How do you determine the markup on the construction project to end up with this profit? 

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