How to Calculate the Gross Profit Per Day Per Overtime
A company’s gross profit is the amount of revenue earned minus the costs of the goods sold for the product responsible for the revenue. While the calculation is a simple one, the factors that make up the costs of goods sold can be difficult to nail down, especially when the production process involves overtime. Overtime involves extra pay for workers, and as such, each hour implemented during production takes away from the gross profit. To calculate the gross profit accurately though, you’ll have to take overtime costs into effect, including them in your costs of goods sold as a function of the direct labor costs involved in manufacturing.
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Instructions
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Calculate the gross profit per day by subtracting the cost of goods sold from the sales price of the units sold throughout the day. Cost of goods sold includes all costs incurred when producing the product, including the raw materials and even the costs to transport production materials to the factory.
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Determine the overtime rate for production by checking each worker’s overtime cost per hour and adding the costs together. Only include the overtime costs of those workers who are involved with direct labor activities towards manufacturing the product.
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Calculate the gross profit per day per overtime hour by subtracting the calculated overtime costs of your workers for an hour’s overtime from the calculated gross profit per day. For each additional hour of overtime worked, subtract another overtime cost of labor for an hour from the gross profit total for the day.
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