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overhead vs. profit

1 reply [Last post]
Mon, 2009-05-04 01:09
Sinan Fahmi
User offline. Last seen 9 years 9 weeks ago. Offline
Joined: 17 Dec 2006
Posts: 68
Groups: None
HI planner
could you explain to me the diffrence between overhead and profit.

thanks in advanced
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Replies

Mon, 2009-05-04 14:09
#1
Samer Zawaydeh
User offline. Last seen 5 years 25 weeks ago. Offline
Joined: 3 Aug 2008
Posts: 1664
Groups: Civil Engineering, Regional Representatives
Dear Sinan,

Profit = %you want to make (say 5-10%) * (Direct cost + Indirect Cost).

Direct Cost Generally include:
1) Labor
2) Equipment
3) Permanent materials and supplies (Sales taxes, greight, discounts, inventory, handling, warehouse and transpotation, spoilage, theft, etc)
4) subcontractors
5) non permanent materials and supplies (Permits, fees, bons, licenses, misc cost)

Indirect Cost,
1) Site Offices Overhead:
-Personnel
-shop drawings
-site securtity
-temporary facilities
-temporary material storage
-phones, utilities
-schedules, reports
-mobilization
-clean up of site
- etc

2) Head Office Overheads (usually a ratio of the overall projects managed by the company = your project value/overall projects value)
-Partial salaries of your boses
-Partial utilities cost
-Taxes
-Bid Estimates cost
-Partial Legal cost
-Partial HR, Finance, IT, Maintenance Departments costs

Basically, you have the Manpower, Equipment and Material as the major cost for each line item in your budget. Then you have the indirect cost from the site and the head office (Overhead).

If you need any more details, please let us know.

Best,

Samer
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