Overhead, Profit, & Sales Tax %

Please note the following points, then enter the correct numbers in the Summary tab of the Ranch House Estimating Workbook.

• Overhead % is calculated as estimated yearly overhead divided by estimated yearly gross Income. You can find this figure in the Overhead tab.
• This construction company completes its initial estimate with a 12% profit.
• Idaho sales tax is 6%.

Example: A construction company always completes initial estimates with a 10% profit. Their estimated yearly overhead and estimated yearly gross income are $132,600 and $1,000,000 respectively.

 The resulting figures in the Cost Summary Header would be as follows:

How to Calculate Overhead, Profit, and Sales Tax in the Estimating Workbook

The Summary tab includes a total of each subsection of each construction phase. Within those tables are columns for Overhead, Profit, and Sales Tax.

To add adjustments to a line item for Overhead, Profit, and/or Sales Tax, add an "x" into the the provided space in the column for each respective adjustment. The calculation will be completed and added to the total cost for the line item.

Example

In the following example, notice that the columns for Overhead, Profit, and Sales Tax that include an "x" include a calculation based on the respective percentages in the Summary tab heading, and that a total is for each line item is calculated.

Recommended Guidelines for Adjusting Costs for Overhead, Profit, and Sales Tax

Recommended Guidelines for Overhead

• No overhead for costs and fees for the project that do not require the labor of company employees (eg. Architecture, Jobsite Facilities, etc.)
• No overhead for materials. Instead, make up overhead costs on the labor costs.
• Charge overhead for all labor costs.
• Charge overhead for all subcontractor costs because a company employee will bid level and will be onsite to supervise the work.
• Charge overhead for all allowance items because company employees will be buying the material and installing it.

Recommended Guidelines for Profit

• No profit for costs and fees for the project that do not require the labor of company employees (eg. Architecture, Jobsite Facilities, etc.)
• No profit for materials.
• Charge profit for all labor costs.
• Charge profit for all subcontractor costs because a company employee will be onsite to supervise the work.
• Charge profit for all allowance items because company employees will be buying the material and installing it.

Guidelines for Adding Sales Tax to Line Items

Sales tax must be paid. It is the law.

• Add sales tax to all materials, fees, and allowances.
• Do not add sales to to labor items.
• Add sales tax for special line items with especially large tax loads (eg. Real Estate Fees)

Remember, sales tax must be accounted for and paid by someone. If it is not included in line items as outlined above, the client will not pay them. In this scenario the construction company will pay sales tax, which will cut into profit.

Example