Job Costing

Mar 27, 2021

A frequent question from businesses who quote on and cost jobs is “what markup should I apply” to cover all overhead costs and generate a profit. This is not a difficult question to answer however it does require a clear understanding of the costs included within the job cost section of a quote eg. materials and direct labour and all other costs of the business which are not direct costs and therefore qualify as overheads in this exercise.

The other critical element is the total job costing base upon which a markup can be applied. That is, you need an understanding of the volume of work you will win in a year. Typically, it is best to build this detail up on a project by project basis.

Once you know your job cost base and overheads it is possible to calculate the markup % to apply to the cost base to generate sufficient gross profit to cover overhead expenses. To generate a profit add a profit target to the overhead number.

Unfortunately I suspect that the size of the markup % may surprise many.

I have developed a simple excel file which allows for the costing base to be built on a project basis. I am happy to share this no obligations, just contact me.