Job Cost Markup Rate

In my previous posts I have been discussing at length different types of costs including direct and indirect costs, direct and indirect material costs, direct and indirect labor costs and lastly burden.  The next point is Markup Rate which is the key to making money.  

Markup is the amount of profit that is made on a job which would also include the taxes made from that profit.  There are a few different types of profit

Gross Profit includes earnings from ongoing product shipments after direct costs of goods sold has been subtracted from the sales revenue.  That is a big mouthful but its basically what was your revenue minus what expenses your incurred while manufacturing that product.  This must be positive or it is costing you more to manufacture the product then the actual direct costs of the product.  A simple example is if you made a bracket and you sold the bracket for $5.00 but the raw material for the bracket was $6.00.  In this case you are already upside down.

Net profit would is earnings subtracts all the miscellaneous expenses including indirect costs, administrative costs and taxes. 

Markup would be higher then your operating profit and net profit but the true goal is to have Markup, Net Profit and Operating profit all to be positive

MIE Solutions has developed software to help manage and control your costs from estimating to shipping the product out the door.

Author: MIE Solutions

David Ferguson has over 20 years of experience in the manufacturing and fabrication industry. David Ferguson has been to over 100 manufacturing companies helping and guiding them to be more efficient and cost effective. As a child in Junior High School David Ferguson found a passion for the early computer systems, which would drive much of his future work. David Ferguson created and sold his first computer program, Arrow Data Systems, which was an early CAD/CAM system for the Apple 2e Computer. In the late 1980's after seeing his father (a sheet metal manufacturer) come home many nights estimating, David Ferguson saw an opportunity to optimize his effort through computer technology. Shortly thereafter the FabriTRAK Production Control package was developed. The Quote It! estimating package was developed out of the FabriTRAK system to become one of the leading sheet metal estimating packages in the world. David Ferguson has always had a passion for developing software to make the manufacturing process simpler, faster and more efficient. Prior to founding MIE Solutions David Ferguson worked with his father at Alco Sheet Metal, METALSOFT Inc. and was a consultant at Toyota Motors Sales. David Ferguson has his Masters in Computer Science and Mathematics from California State University, Long Beach.

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