Total Direct Costs (Expenses) for Department: Costs incurred that can be directly attributed to, and associated with, selling goods and services. They are sometimes broken down into two main categories; labor and MESO (materials, equipment, sub-contractors, and other). Examples may include sheet metal, furnaces, and installation labor.

This calculator gives you access to a powerful management tool which allows you to determine the proper percentage markups to achieve true break-even (no net profit but all overhead is covered). From this, you can determine exactly how much you must mark up a product or service to make a certain net profit margin.

The method used by this calculator is commonly referred to as the "Dual Overhead Allocation" method. This method has been used for many years by finance professionals with very good accuracy. However, it has been found to be somewhat inaccurate for businesses who sell jobs that are highly labor or MESO intensive.

Experts have overcome this deficiency through the use of a sophisticated algorithm. This correction is reflected in this calculator. The result is a far more accurate reflection of your true break-even than what  the old dual rate system can provide.

The problem with most calculators is that they do not distinguish overhead by department or by product group. That is, they do not breakout overhead by department or by product group (labor or MESO). This methodology is highly flawed and dangerous to use. What makes this calculator highly unique and powerful is that it first calculates overhead for a specific department - even if you do not know the amount yourself. The calculator then determines overhead by product group prior to calculating breakeven. The result can be a highly accurate report of your breakeven point.

Here are a few points to keep in mind. This calculator is only as accurate as the information you enter into it. Please verify your numbers prior to using. Breakeven amount is based, among other things, on total annual sales. The calculator assumes your sales will be the same as the prior year. If your sales go up, your breakeven amount may go down. If your sales are lower than last year, it is possible that your breakeven amount will go up. If you have a budget, please use the numbers off your budget to perform the calculations. With a budget, you can price labor and MESO today, based on what you predict will happen in the future.

With this calculator, you are utilizing one of the most sophisticated mathematical formulas, for calculating breakeven, available to the contracting industry.

We have examined dozens of "breakeven" calculators on the web. None of them, that we tested, were designed specifically for HVAC, Plumbing, Electrical, and Appliance contractors.

While they seemed accurate with respect to the basic breakeven formula, they are largely useless to contractors for several reasons. In order to determine your breakeven with the traditional formula, you must have your overhead accurately broken out by department. Each department must have fixed and variable overhead separated. If you have all of this information available, you still cannot calculate breakeven on labor and MESO (materials, equipment, sub-contractors, and other direct costs) separately. As you know, you can not markup labor and MESO the same way. Labor must have higher margins.

If you wish to price labor and MESO separately (you better!), you must have overhead separated by which product type it belongs to. For example, how much of your rent should be allocated to producing labor and how much for selling MESO. You must know this in order to use a traditional breakeven formula. Very few contractors will ever have access to this type of detailed information.

Through some fairly sophisticated and unique methods, we have overcome these challenges. Our calculator will first automatically create profit centers. In other words, it will calculate overhead based on department. Next, the calculator determines overhead based on the product type - labor or MESO. Currently, no other calculators can perform these functions. But eventually, some copycat will steal our stuff and create their own.

We recommend that you use the calculator, even if you have to spend some time getting the answers. However, while there is no substitute for a complete and proper analysis of your financial statements, here is a good rule of thumb. Take the amount that you pay your technicians (direct labor cost per hour), multiply it by 3.00 and divide by 75. This is your retail selling price. Example: Let's assume you pay your technician $18.00 per hour (we hope it's not any less). $18.00 x 3.0 equals 54.00. Divide $54.00 by .75. This equals $72.00. $72.00 is your retail price of service per hour.

If you like this calculator and are interested in getting more detailed financial information about your company, you should check out our product called Beyond Breakeven. This program is a very powerful financial utility that is easy to use. It tells you your breakeven point by department and by product. It calculates approximately twenty key financial ratios. It can predict bankruptcy using Z-Score technology. BBE can breakout all of your sales, direct costs, overhead, and profit by department (profit center). In other words, BBE will departmentalize your financial statements - even if you don't. To learn more about this and all or our unique products, click on Products above.

This loan calculator is written in Java Script. In order to use it, you need Windows 95, 98, 2000, ME, XP or NT and a Java capable browser and the "Allow Java Scripting" option activated.