Yellow Bullet Forums banner

1 - 19 of 19 Posts

·
Registered
Joined
·
20,770 Posts
Discussion Starter #1
What formula's do you use to calculate your fixed and variable overhead costs:confused::confused::confused:
 

·
Registered
Joined
·
1,050 Posts
accountant does it, what I do know is that it is a pain in the ass and never 100% correct. We are a relatively small construction company with 3 office employees and 13 field. 90% of our cost is labor.
 

·
Registered
Joined
·
20,770 Posts
Discussion Starter #3
accountant does it, what I do know is that it is a pain in the ass and never 100% correct. We are a relatively small construction company with 3 office employees and 13 field. 90% of our cost is labor.
Very hard to calculate especially as some of the variable costs can changes so much. Thinking of averaging some of these costs. Spoke with a few accountants but being in manufacturing there is just too many associated costs.
 

·
Registered
Joined
·
2,313 Posts
I calculate total overhead cost yearly and adjust it as a percentage of labor for the following year.
 

·
Registered
Joined
·
4,721 Posts
What you put on paper as a projected reality gets changed to what reality comes out to be. Your job as an owner is to make the projected be reality. Its a variable formula that you want to lessen the variables as much as possible and make them an equitable constant.
There's your job!
 

·
Registered
Joined
·
20,770 Posts
Discussion Starter #6
I calculate total overhead cost yearly and adjust it as a percentage of labor for the following year.
I tried that but we added machinery, which meant electric went up, and that year our business insurance went up too. Seem like I just can pin down an accurate number
 

·
Registered
Joined
·
20,770 Posts
Discussion Starter #7
What you put on paper as a projected reality gets changed to what reality comes out to be. Your job as an owner is to make the projected be reality. Its a variable formula that you want to lessen the variables as much as possible and make them an equitable constant.
There's your job!
I agree but how do you predict hidden increases like cost per kw from the power company, or cost of natural gas this winter, or the increase in cutting fluids ect....Going off last years numbers is irrelevant to what 2017 might cost I guess as mentioned you can use it as a bench mark and adjust
 

·
Registered
Joined
·
669 Posts
You will never accurately project it. I'm in the construction trade also and the materials price change all the time plus where we buy from around are area does also. Labor is the biggest expense by far.
 

·
Registered
Joined
·
2,313 Posts
I tried that but we added machinery, which meant electric went up, and that year our business insurance went up too. Seem like I just can pin down an accurate number
Both of our insurance policy's renew at the same time...end of November, so it's easy for us. Our accountant gives us a heads up regarding Jan 1 tax changes ahead of time so that helps too. Maybe try readjusting quarterly?
 

·
Registered
Joined
·
2,313 Posts
You will never accurately project it. I'm in the construction trade also and the materials price change all the time plus where we buy from around are area does also. Labor is the biggest expense by far.
That's why we calculate materials separately from OH and labor. Materials change from one project to the next. Labor + OH% + Materials = project cost
 

·
Registered
Joined
·
4,721 Posts
I agree but how do you predict hidden increases like cost per kw from the power company, or cost of natural gas this winter, or the increase in cutting fluids ect....Going off last years numbers is irrelevant to what 2017 might cost I guess as mentioned you can use it as a bench mark and adjust
It's those small details (that loom large), you need to address those small details and have a more realistic figure for each an every one of those small details before making a decision to add new equipment or labor to a process. Forecast a future, the cost increase or decrease, consumables, waste, a contingency to correct for the unforeseen and add a buffer based on a past benchmark and the knowns.
Nothing stays the same.
 

·
Registered
Joined
·
7,506 Posts
utilities
rent
or payment
property taxes
insurance
labor
maintenance
cost of goods sold
Advertising
 

·
Registered
Joined
·
929 Posts
I sell commercial insurance and right off the bat I can tell you that most companies are going between 8-12% this upcoming year.
This about that. Decent size company. 100K a year(which isn't hard in nj) and your talking about a 12,000 dollar swing. JUST IN INSURANCE. God forbid you get a claim or like my one client who added 5-F350's.
F-f350's with a bad auto record is 3K per. so theres 15K. he had a claim, and he got hit with the MAX cause he expanded. He was not happy with a 40,000 dollar swing.
 

·
Registered
Joined
·
669 Posts
It seems like when I think I have it figured out something will happen that messes it up. In November we had a job that we "should" of finished in 3 weeks. A week into the job we were actually looking like we could finish the end of the next week. Well after 2 days and 2 inches of rain the next week I figured we could still make the 3 week projection but of course it rained another inch that week and made me run over by 3 days.
 

·
Registered
Joined
·
2,313 Posts
It seems like when I think I have it figured out something will happen that messes it up. In November we had a job that we "should" of finished in 3 weeks. A week into the job we were actually looking like we could finish the end of the next week. Well after 2 days and 2 inches of rain the next week I figured we could still make the 3 week projection but of course it rained another inch that week and made me run over by 3 days.
Do you figure any downtime into your labor projections? I figure 10% and that's usually about right. Downtime, equipment failure, weather, fucking around, ect.

The weather screwed up the project in your example but I would assume you don't pay the guys on lost rain days, overall did the man hour total go over projections?
 

·
Registered
Joined
·
669 Posts
Do you figure any downtime into your labor projections? I figure 10% and that's usually about right. Downtime, equipment failure, weather, fucking around, ect.

The weather screwed up the project in your example but I would assume you don't pay the guys on lost rain days, overall did the man hour total go over projections?
I add 10% for down time/screw ups etc. I don't pay them for when it rains and they don't work but the rain made it so hard to work that they were getting 4 hours of work done working 9 hour days. I was insite with them and it was nasty so I understood the time it was taking. Just one of those things when you work in this trade. We've installed foundation piers on houses that only went 15ft deep and we were already lifting and we've also had them go 40-60ft and you know it's gonna be a long job at that point. Gotta take the good with the bad.
 

·
Registered
Joined
·
1,050 Posts
We calculate our overhead on field labor costs of the specific project. Our overhead cover 3 office salaries, buildings, utilities, and other misc crap that seems like a black hole.
 

·
Registered
Joined
·
871 Posts
Its very hard you can as you know look at what you did last year. look at how the power cost have risen in your area add that in . increase it by 1-3% But there is always that unknown factor. I have to have a new line installed for internet. They will pay for some but not all due to how far they have to run the cable. It will be 300 on my end but thats just one of the little items.. A few bulbs in the shop need replacement and I have a several ballasts that are going bad. They are no longer made so buy new and re wire or opt for a higher cost no ballast led bulb.

Breakage is another factor .. I know add a shop fee to every bill. I started looking at cost of brake cleaner, solvent tank charges , blast media, shop towels loc tite, anti seize copper spray etc etc those are the small things that do not seem like much until the end of the year and you find that you lost a bunch of money.. Add being its not even a item that you can say charge a whole bottle to the customer its up to you to figure in how much is used on each job.

Then labor efficiency , how are the jobs really going are you completing them in the time frame for the bid or are you over often under etc.

Here is one example I dyno tune Cost of the dyno 38,000 dyno booth 43,000 electrician to wire it all in 3,200, Roofer and construction of air intakes and exhaust outlet 4,100 , Computers, monitors another 1,300. 89,6000 in one item. Shop rate is 90 per hour dyno rate is 100 ( cost of the power) time to tune is 4.5 hours . so I charge 450 for a tune.

However many of these do not have the correct plug wires on them , or spark plugs , I have to test fuel pressure, check CCP ( as many DIY guys install the cams wrong and they are out of time ) So thats is another .25 in labor time. Then I also need a 18 mm bung inthe pipe for my WB sensors , ok some pipes have them others do not. If they do not I have to remove heat sheilds install 3/8 riv nut into the head pipe. SO now you have the 11 cost on the riv nuts plus a total of .5 extra labor there .

I tune 150-200 bikes a year so lets use 175 lets take the extra labor split it in half .375 65.62 hours X shop rate $5906 in a year was given away . That is where the little things bite . It does not seem like much at the time but end of the year it a dumb mistake . That is where you need to make some changes on how you do things
 
1 - 19 of 19 Posts
Top