InTents April/May 2020 - 45
* Profit is revenue multiplied by the
contribution margin:
(hotels, per diem, airfare), transportation (number of trucks multiplied
by the average cost to operate plus
fuel and ballast transportation costs),
commissions associated with the
project, and so on.
$500,000 X 0.4 = $200,000 profit
In this example, every additional dollar
past BEP should yield a profit of $0.40.
See the infograph on page 46 for an
application of this method to determine
whether a job will contribute to the
company's bottom line.
Barbara's method
In The Alleen Company's market, price
for tent rental is often set by competition
and market rates. Accurate job costing
is required to determine if a project
warrants added charges. To price a
project, Barbara follows this method:
1. Calculate variable costs. This includes labor (labor hours multiplied
by labor costs), materials, travel
2. Calculate the gross profit (GP) and
gross profit margin. Gross profit
margin is often expressed as a
percentage of revenue. The formula
for gross profit margin is:
GP margin = R - Vc/R
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3. Calculate annual fixed costs. These
include salaries (managers, sales,
warehouse and administrative, plus
related payroll taxes); advertising,
marketing and promotions; legal,
accounting, information technology,
bank fees, dues and subscriptions;
insurance; depreciation; real estate
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InTents April/May 2020
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