USA Overhead


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Simple question, followed by context for clarity ( I hope.)

I’m trying to determine the overhead cost or o/h percentage associated with a particular sale. How can I do this?

Example: My waterproofing company does 3m in volume annually. My booker says I average about 35% in overhead to get the 3m

Okay. A salesman gets my a specific job or sale for, say, $10,000. How in the hell do I determine the o/h associated with that specific sale? It doesn’t seem right to just multiply the 10k by $35%. So how DO I calculate the o/h for that or any specific job/sale?

Thanks.
 
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kirby

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To get the exact o/h you would need to record the elements of overhead in detail for a specific job. It's not impossible and actually useful to determine if a particular job is over or under that 35% average. But note that some of that overhead can be specifically identified while some (like allocating depreciation or management salaries) are at best a good guess.
 
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Thanks, Kirby.

That’s exactly what I thought, too; I.e.., each individual job has its own o/h identity.

Btw, are you an accountant by trade?
 
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Also, since I’m being a pain in the rear, would you say that there’s really a formula to actually determine the o/h for a specific, individual sale?

My boss insists he can just multiply the sale ( gross) by the 35% o/h macro number and figure it out on that basis. I told him he was nuts and gave him an illuminating example: if I sold a job for $100,000 then the O/h for that job ( using his nutty formula) would be $35,000?

I don’t think so.
 
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kirby

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Exactly. Let's say you have two identical jobs lined up. Both will cost the same to create and the usual job price you charge is $100,000. But Customer A calls you and says "I've really got to get this done. I'll pay $300,000 for the job."
So according to how your boss figures things: your boss would say the O/H on the $300,000 job is $105,000 and then the same job for $100,000 he'd say the O/H on that is $35,000. ?!? Crazy time.
If someone thinks it is unrealistic to pay more for a job, look up "Clinton Myers" and how he rebuilt the Santa Monica Freeway after an earthquake 2 and a half months ahead of schedule.
 
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