A small service business wants to understand why steady sales leave little room for growth. Start by separating direct job costs from overhead.
| Annual figure | Amount |
|---|---|
| Revenue | $240,000 |
| Direct materials | $96,000 |
| Direct labor | $48,000 |
| Gross profit | $96,000 · 40% |
| Operating overhead | $78,000 |
| Operating profit | $18,000 · 7.5% |
Gross profit = revenue minus direct materials and labor. Operating profit = gross profit minus operating overhead.
The business generates a positive gross profit and covers the overhead shown in this example.
Annual totals do not show which jobs create the strongest returns. Compare estimated and actual costs by job type before changing prices or adding more work.
Profit does not show when customers pay or bills fall due. A cash-timing review needs additional information.
A scoped analysis can provide a financial review, questions to investigate, strengths and opportunities, and a prioritized next-step plan.
The depth depends on the selected package and available records.