Overhead

[pgordon]

After figuring my overhead , how do you break it down? per hours worked?
Per crew?...... say OH = $10,000 a month. If i have $30,000 in recivables,
would that be a % 30 over head? If I have $60,000 in recievables would that make my over head %15 ? It apears that my over head % would changes if i am busy or slow.

 

[cadpoint]

Your going to have to find that from your numbers, the answer can be varied and almost infinite based on what you do, theres about three of four near constants that will be available to use right way. Once you understand which expenses go where!

Might I recommend the Book:

How to Start & Operate an Electrical Contracting Business , C.L. Ray, Jr

There is a total run through of all related accounting terms!

There is chart in the book and you might look up the term "Overhead Adder" in respects to overhead. This is used to gain an understand of the cost of over head if the cost of overhead is unknown and they recommend that only experienced accounting personnel use it. But its based on the number of jobs a percent adder per the number of jobs.

Enjoy

 

[emahler]

really depends on how you bill out your labor....do you bill each man (whether jw or apprentice) at the same rate? or do you bill by crew?

the way we always did it for service is by the truck...always knew what it was per man hour, but covered it by the truck...i.e if overhead was $5000 month, and we had 5 trucks on the road...each truck billed $1000/month just for OH...

one thing to keep in mind is your actual productivity...if you figure it out per man hour, don't calculate by 2000 hrs...

but to answer your question, OH fluctuates as a whole dollar amount, but shouldn't fluctuate as a percentage...i.e., it will typically cost more to make more...

 

[magictolight.com]

but to answer your question, OH fluctuates as a whole dollar amount, but shouldn't fluctuate as a percentage...i.e., it will typically cost more to make more...

Overhead percentage will vary due to the fact that you have fixed expenses that don't change, whether you have a slow month or a busy month. I am in the same boat, trying to nail down what percentage I should be using. I am taking the last 12 months average and plugging that into my proposals.

 

[emahler]

Overhead percentage will vary due to the fact that you have fixed expenses that don't change, whether you have a slow month or a busy month. I am in the same boat, trying to nail down what percentage I should be using. I am taking the last 12 months average and plugging that into my proposals.

correct...day to day, week to week, or even month to month, OH as a % will fluctuate...but over the course of a year, you should have an average...

 

[Power Tech]

correct...day to day, week to week, or even month to month, OH as a % will fluctuate...but over the course of a year, you should have an average...

It's very difficult to nail down overhead in construction. I is not like retail. If you spend 2 weeks bidding a job and don't get it. That's overhead. I am glad when I get the job I bid like I didn't want it.

 

[Rewire]

On a busy month we might spend 8 grand on fuel and in a slow montn 2500. We do a line item budget for the year then it is broken down into what we need to make each month to meet that budget. So if I budget for $60,000 in fuel thet means I need $5000 each month.I do this with all expenses and this gives me my monthly projected budget. Then I set up a projected yearly income based on last years sales.We have a breakdown of income devived between commercial and residential with sub catagories for new construction ,remodels,and service calls.Once you have a projected income and projected expensise then you simply find the % needed .

 

[cadpoint]

Overhead and Profit

Overhead and Profit

I found this equation looking at other things and thought about your orginal OP!

Once you know your Overhead Charge in respects to a bid job you could apply the following sequences of numbers to get a sum. The numbers one could use are by no means rigid!

Profit & Combined Overhead = 10% + 30% = 40%

Total Bid...............100%
Profit and OH........- 40%
............................60%

Therefor Bid price = $5,000 = $8,333.00
............................ .60

Based on a sample business question like this:

If you have equipment, labor, and material cost of $5,000 and the overhead of 30% and would like to make 10% profit. What would the selling price be?

A. $7,000.00
B. $6,599.00
C. $7,150.00
D. $8,333.00

Well don't do what I did in the problem and go with answer __.
U don't just add the percentage together and mutiple it againest the base price!
It is a basic accounting practices you might miss, like me!
Oh, And don't ask me to explain it further either !

Enjoy

 

[emahler]

On a busy month we might spend 8 grand on fuel and in a slow montn 2500. We do a line item budget for the year then it is broken down into what we need to make each month to meet that budget. So if I budget for $60,000 in fuel thet means I need $5000 each month.I do this with all expenses and this gives me my monthly projected budget. Then I set up a projected yearly income based on last years sales.We have a breakdown of income devived between commercial and residential with sub catagories for new construction ,remodels,and service calls.Once you have a projected income and projected expensise then you simply find the % needed .

but with a busy month should come more income...so as a percentage it should remain relatively the same...

as you spend a few years in business, you will start to know what months are generally busy, and what months are generally slow...when we ran service, I knew that we would be quiet in Jan-Mar, pick up in Apr-May, run flat out from Jun-Nov and drop off in Dec...except for a little blip right before christmas...

and our budget would change from month to month...but our percentages wouldn't ever vary much...if they did, we knew there was a problem...