Manufacturer Price Sheet: Material, Labor, Overhead & Profit

The following video breaks down how a manufacturer should come up with a price for industrial finished goods. First, the company must account for its material costs and apply a 5 percent indirect cost to that portion of the manufacturer's price sheet.

This 5 percent is meant to offset overruns in production and or additional costs of financing inventory and material purchases.

Second, the company must account for its labor relative to each operation performed to turn a raw material into a finished good. The calculation involves defining the operation and applying the labor cost to both the setup time in manufacturing and the actual run time.

Third, all labor costs are added in order to come up with a complete total for all the costs of manufacturing a given product. Those costs are then followed up by the company's overhead, which is calculated by taking its indirect expenses divided by its direct expenses. Indirect expenses are those expenses that are in addition to the the costs needed to produce a part. Direct expenses are exactly that. These include the costs involved or expenses involved in manufacturing the part.

Finally, the company adds its mark-up in order to secure a profit on the sale. Profit is critical because it helps to fund the company's pursuit of new product introductions and secure its long-term future.

Here is a sample of the Manufacturer Price Sheet in Excel Format
http://www.driveyoursuccess.com Video explains how to price a product with direct material, labor, overhead and profit