Overhead

Overhead costs are general in nature and usually involve those costs associated with the front office. These include the payroll associated with the office, secretary, bookkeeper, cleaning staff etc. Other overhead costs include rent, utilities at the office, professional services from the lawyer (not contract related), the accountant, banking fees, office supplies, postage, and marketing.

Estimating in Construction – Part IV (Concepts, Tenets, and Principles)

Well developed, accurate and timely estimates are the best tool ensuring profitability in the construction industry. No other internal control mechanism is as valuable to the contractor as the estimate. Good estimating systems in construction provide the management team with the necessary confidence to make long-term decisions benefiting all parties involved with the company. Customers receive a higher quality structure with less warranty requirements, employees get a sense of security with their tenure, and vendors/subcontractors acquire desirable relationships with their contractor assuring delivery of best practices for their respective trades. Simple put, good estimates deliver profits to the contractor.

Gross Profit Margin

Gross Profit Margin

The difference between the sales price and the cost of the product or service rendered is known as gross profit margin in business. It is traditionally the amount identified on the income statement or a tax return as the amount earned after cost of sales a.k.a cost of goods sold, cost of services rendered, etc. is subtracted from sales (revenue).

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.

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. 

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