Markup For Profit/overhead?
 
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Old 01-22-2008, 01:38 PM   #1
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Markup For Profit/overhead?

I have just recently joined a small residential builder as an estimator. This is not my first job as an estimator for a company.
The question that has been coming up in past few weeks is how the boss wants to do his P/OH. For example for a 25% mark up he wants to take our cost and divide by .75, in the past people that I have worked for multiplied by 1.25 to figure their mark-up. I guess to be competitive, most people multiply by the 1.25. What would you do?

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Old 01-22-2008, 01:48 PM   #2
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Re: Markup For Profit/overhead?

Seems to me that if you take your costs and divide by .75, you end up with a 33 1/3% mark up. Am I wrong? But if you say that your markup is to be 25% of revenue, the divide by .75 works. if you want to mark something up 25%, you multiply by 1.25. Tricky wording.
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Old 01-22-2008, 01:48 PM   #3
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Re: Markup For Profit/overhead?

you are confusing markup and margin...your cuurent boss want 25percent margin on the selling price (at the end of the month he wants 25 percent profit)

multiplying by 1.25 is only 20 percent margin...

what's $100 x 1.25?

what's 25 percent of $125?
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Old 01-22-2008, 01:57 PM   #4
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Re: Markup For Profit/overhead?

25% of 125 is 31.25 thats his profit?
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Old 01-22-2008, 02:03 PM   #5
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Re: Markup For Profit/overhead?

Noooo... 25% of 125 is 25.
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Old 01-22-2008, 02:09 PM   #6
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Re: Markup For Profit/overhead?

Quote:
Originally Posted by Forry View Post
Noooo... 25% of 125 is 25.
I don't think so

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Old 01-22-2008, 02:12 PM   #7
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Re: Markup For Profit/overhead?

Oh! hehe, mixed my #'s in my little brain...dd got it right. Guess I'll go back to paper work. And practice with the calculator some more.
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Old 01-22-2008, 03:20 PM   #8
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Re: Markup For Profit/overhead?

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25% of 125 is 31.25 thats his profit?
nope...it means that he's not making a 25 percent profit if you markup your costs by 1.25...

if his costs are $100, and he's charing $125,
it means he's only making a 20 percent profit...
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Old 01-22-2008, 03:27 PM   #9
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Re: Markup For Profit/overhead?

This is one way to do it----------------
http://www.hometechonline.com/pce/toppage1.htm
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Old 01-22-2008, 04:11 PM   #10
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Re: Markup For Profit/overhead?

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Originally Posted by mahlere View Post
nope...it means that he's not making a 25 percent profit if you markup your costs by 1.25...

if his costs are $100, and he's charing $125,
it means he's only making a 20 percent profit...
Which is his margin? If that's correct I'm getting the hang of it.
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Old 01-22-2008, 05:37 PM   #11
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Re: Markup For Profit/overhead?

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Originally Posted by ddevenney13 View Post
Which is his margin? If that's correct I'm getting the hang of it.
This link will do the math for you and explain it.
http://www.thebizshop.com.au/dsbn/std/std_markup_E.htm
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Old 01-22-2008, 08:53 PM   #12
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Re: Markup For Profit/overhead?

Thank-you for your input. It has made a world of difference in my understanding.
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