Letās say they made 40% profit on the $40k. Thatās $16k profit they made April 2015. Last April we made 30% profit on $180k. Thatās $54k profit.
Given the weakness you have in economics, finance, accounting, and anything dealing with math, on what basis do you calculate this"profit" you allege they made?
I've explained before what EBIT is and why the use of "profit" is generally imprecise and inappropriate. I suspect that as a line item on an actual income statement, the ROCE on your salary is not anywhere close to what you fantasize it to be.
I told my brother this story and he does know what heās talking about. Heās a high up big wig vp who helps companies restructure. Anyways, he was agreeing with my new boss IF we were a big company. But we are not. So hereās a great example.
We donāt get as big of a discount on machine tools as we do our stuff thatās not machine tools. Long story short is we donāt get 46-60% off machine tools we only get 10% off. So I told my customers Iād give them 5% off machine tools. Hereās the problem. Letās say itās $5000 machine tool. Do you want to make $250 on that $5000? Ok after EBIT itās $150. Do you want that money? One of those a week is an extra how much a year? A big company would say no a small company says heāll yea.
What?
Good lord, you have no clue.
What you sell a product for is irrelevant.
You have to determine the cost factors:
If you are not directly making the part, then you are in a support role, hence overhead.
So if you buy a cutter for a mill for $3,850, then have a man package it taking 10 hours, at $30 and hour, you incur $300 in labor. A standard overhead is 200% so you have $600
Your cost of sales is $4,750 giving you a gross margin of $250. But before that is net profit you have to factor in G&A and myriad of other expenses, leaving you with Earnings Before Interest and Taxes (Depreciation and Amortization) or EBIT (DA)
The idea that your employer is making "30% profit" on your salary is laughable. If you are in an overhead or administrative role, there is no direct line to earnings.