In previous posts, I have been discussing at length the different types of costs—including direct and indirect material costs, labor costs, and burden of costs. The next area of costing that needs to be addressed is “Markup Rate”, which is the key to making a profit during production.
Markup is the amount of profit that is made on a job, which also includes the taxes made from that profit. There are a few different types of profit to consider:
Gross Profit = Earnings from ongoing product shipments after direct costs of goods sold has been subtracted from the sales revenue. Basically, this is your revenue minus what expenses you incurred while manufacturing that product. This must be positive or it is costing you more to manufacture the product then the actual direct costs of the product. A simple example is if you made a bracket and sold it for $5.00, but the raw material for the bracket was $6.00. In this case, you are already losing money.
Net profit = Earnings minus the miscellaneous expenses (including indirect costs, administrative costs, and taxes).
Markup would be higher then your operating profit and net profit but the true goal is to have Markup, Net Profit, and Operating profit all to be positive
MIE Solutions has developed software to help manage and control your costs from estimating to shipping the product out the door.
Source: https://www.mie-solutions.com/founders-blog/estimating/job-cost-markup-rate-11
Material requirement planning (MRP) is a method to craft a plan for the necessary materials for manufacturing.
You need to answer the questions of what types of materials are required, their quantity and last but not the least at what time you want them.
Claiming is simpler than getting it done.
It seems true in this case.
For seeking the response of these queries, quite work is to be done.
