Cabinet Shop Job Costing: Separate Margin From Markup

Margin and markup use different denominators, so confusing them can change a cabinet quote materially. Margin compares profit with selling price; markup compares profit with cost. Define the cost base first, then use the formula that matches the decision.

Work the numbers

For a hypothetical job with a $12,000 cost and a $15,000 selling price, the difference is $3,000. Margin is $3,000 divided by $15,000, or 20%. Markup is $3,000 divided by $12,000, or 25%. These figures illustrate arithmetic, not a recommended target.

Make the cost base explicit

• Identify materials, direct labor, subcontract work, and the overhead allocation included in the estimate.
• Keep taxes, deposits, and cash receipts distinguishable from operating profit calculations.
• Record approved scope changes before comparing final price with original estimated cost.
• Label reports with the calculation used so two teams do not compare different measures.

Use it in a review

When actual material cost rises, update the expected final cost before discussing remaining margin. Review open commitments as well as invoices already received. A job can look profitable mid-production simply because some costs have not arrived yet.

Agree on the cost boundary before comparing jobs

Decide which costs the report includes and apply the definition consistently. Direct material, direct labour, outside processing, freight, and installation may be captured in different places. If one job includes installation and another excludes it, a comparison of their reported margins can lead to the wrong conclusion.

Document whether labour uses a wage rate, a burdened rate, or another internal costing rate. Also state how overhead is treated. These are management reporting choices that should be reconciled with the business's accounting approach; a blog example is not a substitute for that policy.

Keep estimate changes distinguishable from execution changes

Preserve the original estimate, approved scope changes, and the current forecast separately. A customer-requested extra cabinet should not look like an unexplained production overrun. Conversely, changing the estimate after work finishes hides the evidence needed to improve the next quote.

For a variance review, compare quantity, rate, and scope. More material at the expected price suggests a different issue from the planned quantity at a higher supplier price. Extra hours in finishing suggest a different investigation from a higher hourly cost. Start with the largest meaningful variance and trace the underlying records.

Use completed jobs to improve the next decision

Group comparable jobs by relevant complexity, such as repeated units, custom curved work, or installation conditions. Review the scope, accepted output, actual hours, material issues and returns, and known exceptions together. Do not treat the fastest historical job as a universal standard.

End the review with a concrete estimating change: an allowance to examine, a missing scope item to include, or a rate to confirm. Job costing is most useful when the explanation changes the next estimate or operating decision, rather than merely producing a percentage after delivery.

Related reading

• Gross Profit by Cabinet Job: Keep the Definition Consistent
• Job Codes That Connect Estimates, Labor, and Materials

Definitions and further reference

• Intuit: the difference between margin and markup
• Intuit: job costing and cost records

How Millbase can help your shop

Bring job-cost reviews back to the recorded work

Use Millbase project tracking to keep a cabinet job and its sub-projects together, then compare estimates with recorded labour and material costs. Insights and reports help the team inspect the people and workstations behind a total and export supported results for the next review.

Ask the Millbase AI agent a question grounded in your workspace records. For example: “Compare this project’s estimated and actual labour, then break the logged hours down by workstation.” You can select a project or worker, ask follow-up questions, and request supported reports and CSV exports.

Check the date range, job scope, and recorded inputs before changing a quote. Keep the accounting treatment of overhead, tax, and revenue in the appropriate financial process; a shop-floor cost breakdown is only as complete as the inputs recorded.