I Have A Question About Overheads

Stone Mountain

Kind of odd, really, but lately it's been on my mind.
When we build a project, there is often garbage and excess material left behind. We usually send out the dump truck and one of my men to clean it up and bring everything back. The gabage goes to the dump.
Would you think this cost should be allocated to overhead, as it is a detail not really associated with the labour with the job.

Or, should I include a small amount of money to cover that extra cost, plus dumping or disposing of the scrap?
I've always included it in general overhead, and my accountant never argued the point. Now I'm beginning to think it should be part of the job cost.
ANy opinions?

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SelfContract

Yes, itemized deductions.

rbsremodeling

For me it is cost associated with the job . I have about 8 categories of dump fees that I choose from that are associated with a project. I have never had a job that some type of trash or debris removal was not necessary.

etc

Pick up truck.
Dump truck
Dumpster 5, 30, 40 yrd

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Mike(VA)

I think the OP is talking about misc debris and materials left over AFTER a job is complete. Sounds like he sends a crew by after completion to 'spiff' up the place, etc. If so, that is something that should be allocated to each job. Its not overhead as there is no cost to that item outside of the event. It is a job-specific event. Allocate costs per job depending on size just like any other job-related cost. IMO, of course.

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I EXPECT THAT SOMEDAY I WILL SEE THE FRUITS OF MY LABOR. IS IT SOMEDAY YET?
Clifton, Great Falls, McLean, Fairfax Station, Manassas, Virginia Renovation Contractor

Mike Finley

The more jobs you do the more costs you have for this item. The less jobs you do the less costs you have for this item. That's a job cost not an overhead.

You could make it overhead if you have a guy who is there all the time doing odd things and his costs are fixed to you no matter how many job sites he has to go to or not go to.

However I would still connect his hours associated with this task to each job he goes to in order to keep your job costing accurate.

Double-A

This should be covered in two areas in my mind, one should be for what we call 'client return'... our fancy word for breaking down the job site, packing up and moving our junk out and returning the area to the client.

The other should be covered in debris removal/disposal. Even if the truck is hauling 2 or three jobs, the disposal feel should be based on the expected amount from the job.

For small jobs this can be as little as $35.00. For larger ones, several hundreds into the thousands.

As to you accountant, he will never, never ever, ever care where you account for these tasks as long as they are accounted for someplace. His sole mission in life is taxes and the like. Running the business and controlling/tracking costs is your job.

And yes, it is labor associated directly with that job. No job, no need to do it (the definition of a job cost), whereas your cell phone bill must be paid every month regardless of the number of jobs (the definition of overhead item).

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outlaw

If you didn't have the job,then you wouldn't have the cost. So it is a job cost and not overhead.

Grumpy

This is definetly a job cost, as it would not be incured if you wern't working on the job. It's something you should anticipate and account for and charge for. Either charge upfront or some how on the back end. Why would it be overhead? Cleanup is just as necessary as the install.

Now let's talk about dump fees. Yes this sometimes does get lumped into overhead. For example after a heavy day of gutter cleaning, like yesterday for example. I had 2 guys do 5 cleaners and got about 10 full bags of garbage. When taking it to the dump it's a total fee of $25. We just absorb that as overhead because linking $25 to $5 seperate jobs would be penny wise and dollar foolish, it's just not worth the time. However let's say we got all 10 bags off the same job, well that'd get accounted to the job.

You have to understand accountants don't really understand our businesses. They understand numbers. But what I have learned is there is always some flexibility as to what goes where.

Stone Mountain

That's what I like about this forum. Ask a reasonable question, get a reasonable answer.
I have no business training. For all these years I just left the cleanup costs to overhead because that's the way we did it.. I never about thought or realized what I was spending on cleanup. Only recently did I start thinking about it as part of a job, along with material delivery and other things.
To clarify dump fees.
Often, there is an old deck or fence to remove and dispose of. Our area has a number of municipal dumps, so when we do a demplition, we loead up the dump truck and take the trash to a dump, where we pay by the ton to get rid of it. The labour and dump costs are factored into the cost of a job. When we go back to the job after it's finished, we pick up all unused material for use on the next job, and we pick up any leftover scrap and get rid of it.

A couple of crews are good at picking up their own trash and putting it in garbage bags to bring back here, while others wouldn't pick up a dime if they saw it.

I'll be taking your advice and incorporating this into my costing. Thank's guys.

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Mike(VA)

That's what I like about this forum. Ask a reasonable question, get a reasonable answer.

You got off easy this time, remember that! That question was frighteningly close to the deadly "what to charge" question.

Away with you now; go back to work.

__________________
__________________________________________________ ___________
I EXPECT THAT SOMEDAY I WILL SEE THE FRUITS OF MY LABOR. IS IT SOMEDAY YET?
Clifton, Great Falls, McLean, Fairfax Station, Manassas, Virginia Renovation Contractor

Stone Mountain

Hey, I didn't ask anyone how much to charge. I know better than that.
However, since you mention it, I do have a "how much" question. How much of an impact on profit is it when you stop at a Tim Horton's (our equivalent to Dunkin Donuts) more than twice a day?
Let's see now.
1 large coffee, double double. $1.35
1 donut, with sprinkles on top $079
1 cookie (for later) $0.79
20 minutes from parking to return
(Assuming you bill yourself out at $60/hr)
$20
fuel, milage on truck to go 3 miles out of your way to stop
$6.00
1 smoke, while waiting for spot
( $0.40
If on way to job site, coffees "for the guys"
(no donuts, though) 4x1.35 $5.40
1 more smoke in truck while enjoying coffee
$0.40
Total cost for one stop $35.13

times twice a day= $70.26
5 days a week= $350.65
times 50 weeks = $17,532.50

Now I know where my profits go!

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Residential Deck Specialist: Vist our Website
www.fenceanddeck.ca

Mike(VA)

I know what you mean. I did a quick calc for one of my guys who smokes. I butt every hour at 10 minutes per, 8 hour day. 80 minutes per day x 5 days = 6.67 hours per week I'm paying him to do nothing but ruin his health. The times they are gonna be a changin'.

__________________
__________________________________________________ ___________
I EXPECT THAT SOMEDAY I WILL SEE THE FRUITS OF MY LABOR. IS IT SOMEDAY YET?
Clifton, Great Falls, McLean, Fairfax Station, Manassas, Virginia Renovation Contractor

Grumpy

I can't wait until i get to the point to forbid tobacco related products from being consumed while on the clock or to be eligible for health insurance. Tobacco is a killer of profit for sure. Smoke breaks, my money wasted. Picking up cigarette butts from a job site, my money wasted. Cleaning after tobacco spitting hill billies, my money wasted.

Patrick

I am dieing to a solution to this. I show up, pick up butts, and complain, and everyone shows me that their pouch is full of butts so it cant be them.

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Originally Posted by Celtic
Like I said...I'm sure you are very good at what you do ~ whatever that is and where ever it happens.

rbsremodeling

Find one day to stay out with them for 8 hours, Some one will forget and dump one on the floor even if your there. Its a force of habit, then act the fool and send him home.

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SLSTech

Butts only go in their pockets or an exterior trash can - I know your guys mainly work outside, but if they go inside with their pouches on you might as well let them smoke inside. I think the smell of cigarette butts is worse than the actual smoke - but what do I know, I still smoke.

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Patrick

thats what I did to put an end to the spitting problem, had to set up an undercover sting, I have different friends drive me in their car and we park out front

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Originally Posted by Celtic
Like I said...I'm sure you are very good at what you do ~ whatever that is and where ever it happens.

Grumpy

The problem is the butts fall out of the pouch. Same thing here, they show me their pouch or pocket, but nails fall out of the pouch. Everything falls out of the pouch. I just think I need a no tobacco policy period. Don't like it? There's the door. I'm not there yet though.

Patrick

I would REALLY like to hear from anyone that has done this. Our state law says no smoking in the workplace. Does outdoors count? My guys are usually good, but if they are on the same job with subs they toss em and point fingers.

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Originally Posted by Celtic
Like I said...I'm sure you are very good at what you do ~ whatever that is and where ever it happens.