Lately, I’ve been working with a lot of contractors who have their own shop space or have other friends and colleagues who have just gone the root of setting up a shop space or have a storage yard somewhere so I made some modifications to the Capacity Based Markup Workbook to accommodate them.
On the Overhead Cost Worksheet I added a new category called “Shop and/or Yard Costs” which had lines for:
- Rent
- Fit Out (Tenant Improvements)
- Shop Equipment
- Shop Inventory
- Utilities
- Equipment Maintenance
- Insurance
- Other Shop Expenses
It should go without saying but I will say it any way that items like Fitting Out your shop and your Shop Equipment you are not trying to recover the total expense for them but instead you’re amortizing those costs over a couple of years to spread them out as we typically do with equipment according to a depreciation schedule. The figure you enter there is your yearly budget for paying down those costs.
Rent is your yearly cost for the rent of the space or what you’ll be paying in the way of mortgage and taxes if you won the space. Utilities are similarly what you estimate your yearly cost for utilities in the shop space. Equipment Maintenance is your yearly budget for maintaining the shop equipment.
I have put Shop Inventory in this group of Overhead Costs since for most of the contractors I have worked with the inventory costs are small, incidental, and hard to attach to a project but it occurs to me now for many contractors who have a substantial shop operations Shop Inventory (screws, glue, fasteners, etc.) while those inventory supplies may still be too difficult to track and attach to specific projects they should be included as a Variable Overhead Cost since the total cost will be driven by the number of employees you have that consuming those supplies.
Let me know what you think. I think this is perfectly okay the way it is since the idea of the workbook is to be mostly correct and not absolutely wrong but I already think I’ll be adding that option to figure Shop Inventory as a Variable Overhead Cost on the revision I work on.
To learn more about the new Capacity Based Markup Workbook v2.07 you can visit both our 360Difference Software website (The Capacity Based Markup Workbook | 360 Difference 2018) and here on this site at The Capacity Based Markup Workbook.
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