6-i

CHAPTER 6. MARKUPS ANALYSIS

TABLE OF CONTENTS

6.1 INTRODUCTION ........................................................................................................... 6-1

6.2 DISTRIBUTION CHANNELS ....................................................................................... 6-2

6.3 MANUFACTURER MARKUP ...................................................................................... 6-3

6.4 WHOLESALER AND CONTRACTOR MARKUPS .................................................... 6-4

6.4.1 Approach for Wholesaler Markup ................................................................................... 6-5

6.4.2 Derivation of Wholesaler Markups.................................................................................. 6-6

6.4.3 Approach for Mechanical and General Contractor Markup ............................................ 6-7

6.4.4 Derivation of National Mechanical Contractor Markups ................................................ 6-8

6.4.4.1 Markups for Mechanical Contractors in the Replacement and New 

Construction Markets..................................................................................... 6-9

6.4.5 Derivation of General Contractor Markups................................................................... 6-11

6.5 DERIVATION OF REGIONAL MARKUPS............................................................... 6-12

6.5.1.1 Estimation of Regional Wholesaler Markups.............................................. 6-12

6.5.1.2 Estimation of Regional Mechanical Contractor Markups ........................... 6-13

6.5.1.3 Estimation of Regional General Contractor Markups ................................. 6-16

6.6 MARKUP FOR MANUFACTURED HOME GAS FURNACES................................ 6-17

6.7 SALES TAX .................................................................................................................. 6-20

6.8 OVERALL MARKUPS................................................................................................. 6-22

LIST OF TABLES

Table 6.4.1 Wholesaler Expenses and Markups..................................................................... 6-6

Table 6.4.2 Mechanical Contractor Expenses and Markups Based on Census Bureau 

Data ...................................................................................................................... 6-9

Table 6.4.3 Baseline Markup, All Mechanical Contractors.................................................. 6-10

Table 6.4.4 Baseline Markups for the Replacement and New Construction Markets, 

All Mechanical Contractors............................................................................... 6-10

Table 6.4.5 Baseline and Incremental Markups for the Replacement and New 

Construction Markets......................................................................................... 6-11

Table 6.4.6 General Contractor Expenses and Markups....................................................... 6-11

Table 6.5.1 Regional Wholesaler Markups for Furnaces...................................................... 6-13

Table 6.5.2 Population-Weighted Regional Mechanical Contractor Markups for 

Furnaces............................................................................................................. 6-15

Table 6.5.3 Regional General Contractor Markups for Furnaces......................................... 6-17

Table 6.6.1 Manufactured Home Manufacturer Expenses and Markups for New 

Construction....................................................................................................... 6-18

Table 6.6.2 Manufactured Home Contractor Expenses and Markups for New 

Construction....................................................................................................... 6-19

Table 6.7.1 Average Sales Tax Rates by RECS Region....................................................... 6-21

Table 6.8.1 Summary of National Average Markups on Non-Manufactured Home 

Furnace Fans...................................................................................................... 6-23
6-ii

Table 6.8.2 Summary of National Average Markups on Manufactured Home Furnace 

Fans.................................................................................................................... 6-24

Table 6.8.3 Summary of Total Markup by Furnace Fan Product Class................................ 6-24

LIST OF FIGURES

Figure 6.2.1 Distribution Channels for Residential Furnaces.................................................. 6-2

Figure 6.2.2 Distribution Channels for Manufactured Home Gas Furnaces............................ 6-3
6-1

CHAPTER 6. MARKUP ANALYSIS

6.1 INTRODUCTION

To carry out its analyses, the U.S. Department of Energy (DOE) needed to determine the 

cost to the consumer of baseline products and the cost of more efficient units the consumer 

would purchase under new energy conservation standards. DOE determined such costs based on 

engineering estimates of manufacturing costs plus appropriate markups based on the distribution 

channels for furnace fans. 

For wholesalers and contractors, DOE estimated a baseline markup and an incremental 

markup. DOE defines a baseline markup as a multiplier that converts the manufacturing selling 

price of equipment with baseline efficiency to the consumer purchase price for the equipment at 

the same baseline efficiency level. An incremental markup is defined as the multiplier to convert 

the incremental increase in manufacturing selling price of higher efficiency equipment to the 

consumer purchase price for the same equipment. Because companies mark up the price to cover 

business cost and profit margin at each step in the distribution channel, both baseline and 

incremental markups are dependent on the particular distribution channel, as described in Section 

6.2. 

The components used to produce a furnace fan are usually purchased by furnace

manufacturers who assemble the furnace fan, which is then installed in a furnace. From this 

point, the furnace fans are passed along the distribution channels as part of furnaces. Essentially, 

various markups applied to these products by different market participants are also the markups 

applied to furnace fans, whose manufacturing costs account for a portion of the total 

manufacturing costs of the finished products. Therefore, DOE developed the markup analysis for 

furnace fans based on furnaces. According to industry sources, the market for furnace fans 

replacing a failed furnace fan is very small, and DOE did not include this market in its analysis. 

At each point in the distribution channel, companies mark up the price of a product to 

cover their business costs and profit margin. In financial statements, gross margin is the 

difference between the company revenue and the company cost of sales or cost of goods sold 

(CGS). The gross margin takes account of the expenses of companies in the distribution channel, 

including overhead costs (sales, general, and administration); research and development (R&D) 

and interest expenses; depreciation; and taxes—and company profits. In order for sales of a 

product to contribute positively to company cash flow, the product’s markup must be greater 

than the corporate gross margin. Products command lower or higher markups, depending on 

company expenses associated with the product and the degree of market competition. 
6-2

6.2 DISTRIBUTION CHANNELS

Two types of distribution channels describe how most furnaces (and the furnace fans in 

them) pass from the manufacturer to the consumer. The first distribution channel applies to 

furnaces installed in replacement markets. In the replacement distribution channel, the 

manufacturer generally sells the equipment to a wholesaler, who in turn sells it to a mechanical 

contractor, who in turn sells it to the consumer.1 The second distribution channel applies to 

furnaces that are installed in new construction and, thus, includes an additional link in the 

chain—the general contractor. In the new construction distribution channel, the manufacturer 

sells the equipment to a wholesaler, who in turn sells it to a mechanical contractor, who in turn 

sells it to a general contractor.

 Figure 6.2.1 illustrates the two main distribution channels for most residential furnaces. A 

new product class, hydronic air handler, was added to the furnace product classes that DOE is 

considering in this analysis. DOE assessed the distribution channel of this product and found that 

it is carried by the same wholesalers and contractors that carry the conventional types of 

furnaces. (1) (2) (3) Hence, the distribution channels described previously also apply to hydronic air 

handlers. 

 Replacement:

 

 New Construction:

Figure 6.2.1 Distribution Channels for Residential Furnaces 

Manufactured home gas furnaces are sold as part of manufactured homes, so these 

furnaces have a specific distribution chain (Figure 6.2.2) when purchased for the new 

construction market. The furnace manufacturer sells to the maker of the manufactured home, 

who installs the equipment in the home. The manufactured home manufacturer sells the home to 

a contractor, who in turns sells it to a homebuyer and provides installation services. The 

 

1 One manufacturer uses a one-step distribution chain (manufacturer to contractor) and is the only known exception. 

Several large retailers are trying to step between wholesalers and contractors, but most experts do not expect the 

trend to change the distribution chain significantly in the near term.

Manufacturer Wholesaler Mechanical

Contractor

Consumer

Wholesaler Mechanical 

Contractor

General 

Contractor

Manufacturer Consumer
6-3

equipment manufacturer markup for manufactured home gas furnaces is identical to the 

manufacturer markup for other furnaces. For manufactured home furnaces purchased for the 

replacement market, the distribution channel should be the same as the replacement distribution 

channel for non-weatherized gas furnaces. 

 Replacement:

 

New Construction:

Figure 6.2.2 Distribution Channels for Manufactured Home Gas 

Furnaces

6.3 MANUFACTURER MARKUP 

DOE uses manufacturer markups to transform a manufacturer’s product cost into a 

manufacturer sales price. Using the CGS and gross margin (GM), the manufacturer markup can 

be calculated as follows:

MFG

MFG MFG

MFG CGS

CGS GM MU + =

Where:

MUMFG = manufacturer markup,

CGSMFG = manufacturer cost of goods sold, and

GMMFG = manufacturer gross margin.

The manufacturer’s CGS (or manufacturer production cost (MPC)) plus its GM equals the 

manufacturer selling price (MSP).

Manufacturer Manufactured

Home 

Manufacturer

Manufactured

Home 

Contractor

Consumer

Manufacturer Wholesaler Mechanical

Contractor

Consumer
6-4

6.4 WHOLESALER AND CONTRACTOR MARKUPS

DOE examined the manner in which wholesaler and contractor markups may change in 

response to changes in furnace efficiency levels and other factors. Using the available data, DOE 

estimated that there are differences between incremental markups on incremental equipment 

costs of higher efficiency products and the baseline markup on direct business costs of products 

with baseline efficiency.

DOE derived the wholesaler and contractor markups from three key assumptions about 

the costs associated with furnaces. DOE based the wholesaler and mechanical contractor 

markups on firm-level income statement data, while it based the general contractor markups on 

U.S. Census Bureau data for the residential building construction industry. DOE obtained the 

firm income statements from the Heating, Air-conditioning & Refrigeration Distributors 

International (HARDI) 2011 Profit Report and from the Air Conditioning Contractors of 

America (ACCA) 2005 Financial Analysis.

(4) (5) HARDI and ACCA are trade associations 

representing wholesalers and mechanical contractors, respectively. DOE used the financial data 

from the 2007 U.S. Census of Business for developing general contractor markups in the same 

form as the income statement data for wholesalers and mechanical contractors. These income 

statements break down the components of all costs incurred by firms that supply and install 

heating and air-conditioning equipment.2 The key assumptions used to estimate markups using 

these financial data are:

1. The firm income statements faithfully represent the various average costs incurred by 

firms distributing and installing residential furnaces.

2. These costs can be divided into two categories: 1) costs that vary in proportion to the 

MSP of residential furnaces (variant costs); and 2) costs that do not vary with the MSP of 

residential furnaces (invariant costs).

3. Overall, wholesale and contractor prices for residential furnaces vary in proportion to the 

wholesale and contractor costs for residential furnaces included in the income statements. 

 In support of the first assumption, the income statements itemize firm costs into a 

number of expense categories, including direct costs to purchase or install the equipment, 

operating labor and occupancy costs, and other operating costs and profit. Although wholesalers 

and contractors tend to handle multiple commodity lines, including room air conditioners, 

furnaces, central air conditioners and heat pumps, and boilers, the data provide the most accurate 

available indication of the expenses associated with residential furnaces.

Information obtained from the trade literature, and from selected heating, ventilating, and 

air-conditioning (HVAC) wholesalers, contractors, and consultants, tends to support the second 

 

2 Wholesalers and mechanical contractors to which these reports refer handle multiple commodity lines, including 

residential and commercial air conditioners and warm-air furnaces.
6-5

assumption; this information indicates that wholesale and contractor markups vary according to 

the quantity of labor and materials used to distribute and install appliances. In the following 

discussion, DOE assumes a division of costs between those that do not scale with the 

manufacturer price (labor and occupancy expenses) and those that do (operating expenses and 

profit). 

In support of the third assumption, the HVAC wholesaler and contractor industry is 

competitive, and consumer demand for heating and air conditioning is inelastic, i.e., the demand 

is not expected to decrease significantly with an increase in price of equipment. The large 

number of HVAC firms listed in the 2007 Census indicates the competitive nature of the market. 

For example, there are more than 700 HVAC manufacturers, (6) 5,300 wholesalers of heat pumps 

and air-conditioning equipment, (7) more than 170,000 general residential contractors, 36,000 

commercial and institutional building contractors, (8) and 91,000 HVAC contractors(9) listed in 

the 2007 Census. Following standard economic theory, competitive firms facing inelastic 

demand either set prices in line with costs or quickly go out of business. (10)

DOE concluded that markups for more efficient equipment are unlikely to be 

proportional to all direct costs. When the wholesaler’s purchase price of equipment increases, for 

example, only a fraction of a business’ expenses increases, while the remainder may stay

relatively constant. For example, if the unit price of a furnace unit increases by 30 percent due to 

improved efficiency, it is unlikely that the cost of secretarial support in an administrative office 

will increase by 30 percent also. Therefore, DOE assumed that incremental markups cover only 

those costs that scale with a change in the MSP (variant costs).

6.4.1 Approach for Wholesaler Markup 

Using the above assumptions, DOE developed baseline and incremental markups for 

wholesalers using the firm income statement from the HARDI 2011 Profit Report (appendix 6-

A.1). The baseline markups cover all of the wholesaler’s costs (both invariant costs and variant 

costs). Here variant costs were defined as costs that likely vary in proportion to the change in 

MSP induced by increased efficiency standards; in contrast, invariant costs were defined as costs 

that are unlikely to vary in proportion to the change in MSP due to increased efficiency 

standards. DOE calculated the baseline markup for wholesalers using the following equation:

WHOLE

WHOLE WHOLE WHOLE

WHOLE

WHOLE WHOLE

BASE CGS

CGS IVC VC

CGS

CGS GM MU

+ ( + ) = + =

Where:

MUBASE = baseline wholesaler markup, 

CGSWHOLE = wholesaler cost of goods sold,

GMWHOLE = wholesaler gross margin, 

IVCWHOLE = wholesaler invariant costs, and

VCWHOLE = wholesaler variant costs.
6-6

Incremental markups are coefficients that relate the change in the MSP of more energyefficient models, or those products that meet the requirements of new energy conservation 

standards, to the change in the wholesaler sales price. Incremental markups cover only those 

costs that scale with a change in the MSP (variant costs, VC). It calculated the incremental 

markup (MUINCR) for wholesalers using the following equation:

WHOLE

WHOLE WHOLE

INCR CGS

CGS VC MU + =

Where:

MUINCR = incremental wholesaler markup,

CGSWHOLE = wholesaler cost of goods sold, and

VCWHOLE= wholesaler variant costs.

6.4.2 Derivation of Wholesaler Markups

Wholesalers reported median data in a confidential survey that HARDI conducted of 

member firms.2 In the survey, HARDI itemized revenues and costs into cost categories, 

including direct equipment expenses (cost of goods sold), labor expenses, occupancy expenses, 

other operating expenses, and profit. DOE presents these data in full in appendix 6-A.1. Table 

6.4.1 summarizes them as cost-per-dollar sales revenue in the first data column.

Table 6.4.1 Wholesaler Expenses and Markups

Descriptions

Per Dollar

Sales Revenue

$

Per Dollar Cost 

of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.735 1.000

Labor Expenses: Salaries and benefits 0.150 0.204

Occupancy Expense: Rent, maintenance, and utilities 0.036 0.049

Other Operating Expenses: Depreciation, advertising, and insurance. 0.054 0.073

Operating Profit 0.025 0.034

Wholesaler Baseline Markup (MUWHOLE BASE) 1.360

Incremental Markup (MUWHOLE INCR) 1.107

Source: Heating, Air Conditioning & Refrigeration Distributors International. 2011. 2011 Profit Report (2010 Data).

In this case, direct equipment expenses (cost of goods sold) represent about $0.74 per 

dollar sales revenue, so for every $1 wholesalers take in as sales revenue, $0.74 is used to pay 

the direct equipment costs. Labor expenses represent $0.15 per dollar sales revenue, occupancy 

expenses represent $0.04, other operating expenses represent $0.05, and profit accounts for $0.03

per dollar sales revenue.

DOE converted the expenses per dollar sales into expenses per dollar cost of goods sold, 

by dividing each figure in the first data column by $0.74 (i.e., cost of goods sold per dollar of 

sales revenue). The data in column two show that, for every $1.00 the wholesaler spends on

equipment costs, the wholesaler allocates $0.204 to cover labor costs, $0.049 to cover occupancy 

expenses, $0.074 for other operating expenses, and $0.034 in profits. This totals to $1.360 in 
6-7

sales revenue earned for every $1.00 spent on equipment costs. Therefore, the wholesaler 

baseline markup (MUWHOLE BASE) is 1.360 ($1.360 ÷ $1.00). 

DOE also used the data in column two to estimate the incremental markup. The 

incremental markup depends on which of the costs in Table 6.4.1 are variant and which are 

invariant with MSP. For example, for a $1.00 increase in the MSP, if all of the other costs scale 

with the MSP (i.e., all costs are variant), the increase in wholesale price will be $1.360, implying 

that the incremental markup is 1.360, or the same as the baseline markup. At the other extreme, 

if none of the other costs is variant, then a $1.00 increase in the MSP will lead to a $1.00 

increase in the wholesale price, for an incremental markup of 1.0. DOE believes that the labor 

and occupancy costs will be invariant and that the other operating costs and profit will scale with 

the MSP (i.e., be variant). In this case, for a $1.00 increase in the MSP, the wholesale price will 

increase to match changes in ”other” operating costs and operating profit of $0.079, which when 

divided by 73.5 cents in cost of goods sold yields an increase of $0.107, giving a wholesaler 

incremental markup (MUWHOLE INCR) of 1.107. See appendix 6-A.1 for cost details.

6.4.3 Approach for Mechanical and General Contractor Markup 

The type of financial data used to estimate markups for wholesalers is also available for 

mechanical contractors and general contractors from the 2007 Economic Census and ACCA 

2005 Financial Analysis. To estimate mechanical contractor markups for furnaces, DOE 

collected financial data from the Plumbing and HVAC Contractors (NAICS 23822) series from 

the 2007 Economic Census and from ACCA 2005 Financial Analysis. To estimate general 

contractor markups, DOE collected data from the Residential Building Construction series from 

the 2007 Economic Census, which is the aggregation of New Single-Family General Contractors

(NAICS 236115), New Multifamily Housing Construction (NAICS 236116), New Housing 

Operative Builders (NAICS 236117), and Residential Remodelers (NAICS 236118). ACCA 

financial data provide GM as percent of sales for the mechanical contractor industry; therefore, 

baseline markup can be derived with the following equation:

(%) (%)

(%)

Sales GM

Sales MUBASE − =

The U.S. Census data include the number of establishments, payroll for construction 

workers, value of construction, cost of materials, and cost of subcontracted work at both state 

and national levels. DOE calculated the baseline markup for mechanical contractors and general 

contractors using the following equation:

Pay MatCost SubCost

V MU CONSTRUCT

BASE + + =

Where:
6-8

MUBASE = baseline mechanical contractor or general contractor markup,

VCONSTRUCT = value of construction,

Pay = payroll for construction workers,

MatCost = cost of materials, and

SubCost = cost of subcontracted work.

Analogously, DOE estimated the incremental mechanical contractor and general 

contractor markups by only marking up those costs that scale with a change in the MSP (variant 

costs, VC) for more energy-efficient products. As stated above, DOE assumes a division of costs 

between those that do not scale with the manufacturer price (labor and occupancy expenses), and 

those that do (other operating expenses and profit). Hence, DOE categorized the Census cost data 

in each major cost category and estimated markups using the following equation: 

CONT

CONT CONT

INCR CGS

CGS VC MU + =

Where:

MUINCR = incremental contractor markup,

CGSCONT = contractor cost of goods sold, and

VCCONT= contractor variant costs.

6.4.4 Derivation of National Mechanical Contractor Markups 

The 2007 Economic Census provides Geographic Area Series for the Plumbing and 

HVAC Contractors (NAICS 23822) sector, which contains national average sales and cost data,

including value of construction, cost of subcontract work, cost of materials, and payroll for 

construction workers. It also provides the cost breakdown of gross margin, including labor 

expenses, occupancy expenses, other operating expenses, and profit. The gross margin provided 

by the U.S. Census is disaggregated enough that DOE was able to determine the invariant (labor 

and occupancy expenses) and variant (other operating expenses and profits) costs for this 

particular sector. By using the equation mentioned above, baseline and incremental markups 

were estimated. The markup results are presented in Table 6.4.2. (Appendix 6-A.2 contains the 

full set of data.)
6-9

Table 6.4.2 Mechanical Contractor Expenses and Markups Based on Census Bureau Data

Description

Mechanical Contractor 

Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.68 1.00

Labor Expenses: Salaries (indirect) and benefits 0.18 0.26

Occupancy Expense: Rent, maintenance, and utilities 0.02 0.03

Other Operating Expenses: Depreciation, advertising, and insurance. 0.08 0.12

Net Profit Before Taxes 0.04 0.06

Baseline Markup (MUMECH BASE): Revenue per dollar cost of goods 1.48

Incremental Markup (MUMECH INCR): Increased revenue per dollar increase in cost of goods 

sold

1.18

Source: U.S. Census Bureau. 2007. Plumbing, Heating, and Air-Conditioning Contractors. Sector 23: 238220. Construction: 

Industry Series, Preliminary Detailed Statistics for Establishments, 2007.

The first data column in Table 6.4.2 provides the cost of goods sold and a list of gross 

margin components as expenses per dollar of sales revenue. As shown in the table, the direct cost 

of sales represents about $0.68 per dollar sales revenue to the mechanical contractor and the 

gross margin totals $0.32 per dollar sales revenue. DOE converted these expenses per dollar 

sales into revenue per dollar cost of goods sold by dividing each figure in the first data column 

by $0.68. For every $1.00 the mechanical contractor spends on equipment costs, the mechanical 

contractor earns $1.00 in sales revenue to cover the equipment cost and $0.48 to cover the other 

costs. This totals $1.48 in sales revenue earned for every $1.00 spent on equipment costs. This is 

equivalent to a baseline markup (MUMECH CONT BASE) of 1.48 for mechanical contractors. 

DOE was also able to use the data in column two in Table 6.4.2 to estimate the 

incremental markups, after classifying the costs as either invariant or variant. At one extreme, if 

all of the other costs scale with the equipment price (i.e., all costs are variant), the increase in 

general contractor price will be $1.48, implying that the incremental markup is 1.48 or the same 

as the baseline markup. At the other extreme, if none of the other costs are variant, then a $1.00 

increase in the equipment price will lead to a $1.00 increase in the general contractor price, for 

an incremental markup of 1.0. DOE believes the labor and occupancy costs are invariant and the 

other operating costs and profit scale with the equipment price (i.e., are variant). In this case, for 

a $1.00 increase in the equipment price, the general contractor price will increase by $1.18, 

giving a general contractor incremental markup (MUMECH CONT INCR) of 1.18.

6.4.4.1 Markups for Mechanical Contractors in the Replacement and New 

Construction Markets

DOE derived the baseline and incremental markups for both replacement and new 

construction markets using the 2007 Economic Census industrial cost data (11) supplemented with 

the most recent ACCA 2005 financial data (4). The 2007 Economic Census provides sufficient 

detailed cost breakdown for the Plumbing and HVAC Contractors (NAICS 23822) sector so that 

DOE was able to estimate baseline and incremental markups for mechanical contractors. 

However, the 2007 Economic Census does not separate the mechanical contractor market into 

replacement and new construction markets. In order to calculate markups for these two markets, 
6-10

DOE utilized 2005 ACCA financial data, which reports gross margin data for the entire 

mechanical contractor market and for both the replacement and new construction markets. 

The HVAC contractors, defined here as mechanical contractors, reported median cost 

data in an ACCA 2005 financial analysis of the HVAC industry. These data are shown in 

Table 6.4.3. 

Table 6.4.3 Baseline Markup, All Mechanical Contractors

Description

Contractor Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.73 1.00

Gross Margin: Labor, occupancy, operating expenses, and profit 0.27 0.37

Revenue: Baseline revenue earned per dollar cost of goods 1.37

Baseline Markup (MUMECH CONT BASE) 1.37

Source: Air Conditioning Contractors of America. 2005. Financial Analysis for the HVACR Contracting Industry.

Table 6.4.4 summarizes the gross margin and resulting baseline markup data for all 

mechanical contractors that serve the replacement and new construction markets. 

Table 6.4.4 Baseline Markups for the Replacement and New Construction Markets, All 

Mechanical Contractors

Description

Contractor Expenses or Revenue by Market Type

Replacement New Construction

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost 

of goods sold

0.70 1.00 0.75 1.00

Gross Margin: Labor, occupancy, 

operating expenses, and profit

0.30 0.43 0.25 0.33

Baseline Markup (MUMECH CONT BASE): 

Revenue per dollar cost of goods

NA 1.43 NA 1.33

Source: Air Conditioning Contractors of America. 2005. Financial Analysis for the HVACR Contracting Industry.

Using the baseline markup data from Table 6.4.4 and results from Table 6.4.3, DOE 

calculated that the baseline markups for the replacement and new construction markets are 4.4 

percent higher and 2.9 percent lower, respectively, than for all mechanical contractors serving all 

markets.

The markup deviations (i.e., 4.4 percent higher and 2.9 percent lower for the replacement 

and new construction markets, respectively) derived for all mechanical contractors were then 

applied to the baseline markup of 1.47 and the incremental markup of 1.18 estimated for the 

Plumbing and HVAC Contractors (NAICS 23822) sector in Table 6.4.2. DOE assumed that this 

deviation applies equally to the baseline and incremental markups calculated from the 2007 

Economic Census. The results of the baseline and incremental markups for the replacement and 

new construction markets served by mechanical contractors are shown in Table 6.4.5.
6-11

Table 6.4.5 Baseline and Incremental Markups for the Replacement and New 

Construction Markets

Baseline Markup Incremental Markup

Replacement Market 1.55 1.23

New Construction Market 1.44 1.15

6.4.5 Derivation of General Contractor Markups 

DOE derived markups for general contractors from U.S. Census Bureau data for the 

residential building construction sector. (12) The residential construction sector includes 

establishments primarily engaged in construction work, including new construction work, 

additions, alterations, and repairs. The U.S. Census Bureau data for the construction sector 

include detailed statistics for establishments with payrolls, similar to the data reported by 

HARDI for wholesalers. The primary difference is that the U.S. Census Bureau reports itemized 

revenues and expenses for the construction industry as a whole in total dollars rather than in 

typical values for an average or representative business. Because of this, DOE assumed that the 

total dollar values that the U.S. Census Bureau reported, once converted to a percentage basis, 

represent revenues and expenses for an average or typical contracting business. Similar to the 

data for wholesalers, Table 6.4.6 summarizes the expenses for general contractors as expenses 

per dollar sales revenue in the first data column. (Appendix 6-A.3 contains the full set of data.)

Table 6.4.6 General Contractor Expenses and Markups

Description

General Contractor 

Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.68 1.00

Labor Expenses: Salaries (indirect) and benefits 0.08 0.12

Occupancy Expense: Rent, maintenance, and utilities 0.01 0.01

Other Operating Expenses: Depreciation, advertising, and insurance. 0.06 0.09

Net Profit Before Taxes 0.17 0.25

Baseline Markup (MUGEN CONT BASE): Revenue per dollar cost of goods 1.48

Incremental Markup (MUGEN CONT INCR): Increased revenue per dollar increase in cost of goods 

sold

1.34

Source: U.S. Census Bureau. 2007. Residential Building Construction. Sector 23: 236115-236118. Construction: Industry Series: 

Preliminary Detailed Statistics for Establishments: 2007.

As shown in the first column, the direct cost of sales represents about $0.68 per dollar 

sales revenue to the general contractor. Labor expenses represent $0.08 per dollar sales revenue, 

occupancy expenses represent $0.01 per dollar sales revenue, other operating expenses represent 

$0.03, and profit makes up $0.20 per dollar sales revenue.

DOE converted these expenses per dollar sales into revenue per dollar cost of goods sold, 

by dividing each figure in the first data column by $0.68. The data in column two show that, for 

every $1.00 the general contractor spends on equipment costs, the general contractor earns $1.00 

in sales revenue to cover the equipment cost, $0.12 to cover labor costs, $0.01 to cover 
6-12

occupancy expenses, $0.09 for other operating expenses, and $0.25 in profits. This totals to 

$1.48 in sales revenue earned for every $1.00 spent on equipment costs. Thus, the general 

contractor baseline markup (MUGEN CONT BASE) is 1.48.

DOE was also able to use the data in column two in Table 6.4.6 to estimate the 

incremental markups, after classifying the costs as either invariant or variant. At one extreme, if 

all of the other costs scale with the equipment price (i.e., all costs are variant), the increase in 

general contractor price will be $1.48, implying that the incremental markup is 1.48, or the same 

as the baseline markup. At the other extreme, if none of the other costs are variant, then a $1.00 

increase in the equipment price will lead to a $1.00 increase in the general contractor price, for 

an incremental markup of 1.0. DOE believes the labor and occupancy costs are invariant and the 

other operating costs and profit scale with the equipment price (i.e., are variant). In this case, for 

a $1.00 increase in the equipment price, the general contractor price will increase by $1.34, 

giving a general contractor incremental markup (MUGEN CONT INCR) of 1.34.

6.5 DERIVATION OF REGIONAL MARKUPS

In this analysis, DOE considered seven different furnace product classes. DOE assumed a 

market saturation rate for each product class that varies by geographical region, based on the 

shipment forecasts for the year 2018. Therefore, regional markups were calculated for each 

furnace fan product class. 

Wholesalers and mechanical and general contractors in the furnace industry were 

divided into the 29 regions provided by the latest Residential Energy Consumption Survey 

(RECS) (13). Regional baseline and incremental markups were derived using the region/state 

level data from the 2011 HARDI Profit Report and the 2007 Economic Census. 

6.5.1.1 Estimation of Regional Wholesaler Markups

Based on the regional income statement from the 2011 HARDI Profit Report, DOE 

estimated baseline and incremental markups for the seven HARDI regions (Northeastern, MidAtlantic, Southwestern, Great Lakes, Central, Southwestern, and Western) using the 

methodology shown in Table 6.4.1. Next, each state in each region was assigned the HARDI 

regional baseline and incremental markups for the region to which it belongs. Third, DOE 

assigned all states to one of the 29 RECS regions and then calculated population-weighted 

baseline and incremental markup averages for each RECS region. The results are summarized in

Table 6.5.1.
6-13

Table 6.5.1 Regional Wholesaler Markups for Furnaces

RECS Region State(s)

Baseline 

MU

Incremental 

MU

1 Connecticut, Maine, New Hampshire, Rhode Island, Vermont 1.368 1.078

2 Massachusetts 1.368 1.078

3 New York 1.368 1.078

4 New Jersey 1.368 1.112

5 Pennsylvania 1.366 1.109

6 Illinois 1.359 1.095

7 Indiana, Ohio 1.364 1.106

8 Michigan 1.364 1.106

9 Wisconsin 1.359 1.095

10 Iowa, Minnesota, North Dakota, South Dakota 1.359 1.095

11 Kansas, Nebraska 1.359 1.095

12 Missouri 1.359 1.095

13 Virginia 1.368 1.112

14 Delaware, District of Columbia, Maryland, West Virginia 1.367 1.111

15 Georgia 1.309 1.099

16 North Carolina, South Carolina 1.309 1.099

17 Florida 1.309 1.099

18 Alabama, Kentucky, Mississippi 1.329 1.102

19 Tennessee 1.309 1.099

20 Arkansas, Louisiana, Oklahoma 1.342 1.114

21 Texas 1.342 1.114

22 Colorado 1.359 1.095

23 Idaho, Montana, Utah, Wyoming 1.393 1.122

24 Arizona 1.397 1.124

25 Nevada, New Mexico 1.373 1.120

26 California 1.397 1.124

27a Oregon, Washington 1.397 1.124

27b Alaska 1.397 1.124

27c Hawaii 1.397 1.124

6.5.1.2 Estimation of Regional Mechanical Contractor Markups

The 2007 Economic Census provides Geographic Area Series for the Plumbing and 

HVAC Contractors (NAICS 23822) sector, which contains state-level sale and cost data,

including value of construction, cost of subcontract work, cost of materials, and payroll for 

construction workers. By using the equation mentioned in Section 6.1.1, DOE was able to 

estimate baseline markups for each state. Because the Census does not provide more 

disaggregated cost data, DOE was not able to differentiate between invariant and variant cost. 
6-14

Alternatively, DOE calculated the national baseline and incremental markups (Table 

6.4.2) and found the incremental markup is around 20 percent lower than the baseline markups. 

DOE further derived the state-level incremental markups by applying this ratio to the baseline 

markup in each state, assuming that this deviation applies equally to all states. (Appendix 6-A.4 

contains the full set of data.)

In order to estimate the baseline and incremental markups for both replacement and new 

construction markets for each state, DOE applied the markup deviations (i.e., 4.4 percent higher 

and 2.9 percent lower for the replacement and new construction markets, respectively) derived in 

Section 6.4.4.1 to the statewide baseline and incremental markups. DOE assumed that this 

deviation of replacement and new construction markets applies equally to the baseline and 

incremental markups. 

Lastly, DOE divided all states among the 29 RECS regions and then calculated 

population-weighted average baseline and incremental markups for mechanical contractors for 

each region, as shown in Table 6.5.2.
6-15

Table 6.5.2 Population-Weighted Regional Mechanical Contractor Markups for Furnaces

RECS 

Region State(s)

Replacement 

Baseline 

MU

Replacement 

Incremental 

MU

New 

Construction 

Baseline MU

New 

Construction 

Incremental

MU

1

Connecticut, Maine, New 

Hampshire, Rhode Island, 

Vermont 1.559 1.247 1.450 1.160

2 Massachusetts 1.538 1.231 1.431 1.145

3 New York 1.600 1.280 1.488 1.191

4 New Jersey 1.583 1.267 1.473 1.178

5 Pennsylvania 1.479 1.183 1.375 1.100

6 Illinois 1.577 1.262 1.467 1.173

7 Indiana, Ohio 1.562 1.250 1.453 1.162

8 Michigan 1.530 1.224 1.423 1.138

9 Wisconsin 1.510 1.208 1.404 1.123

10

Iowa, Minnesota, North 

Dakota, South Dakota 1.530 1.224 1.423 1.139

11 Kansas, Nebraska 1.460 1.168 1.358 1.087

12 Missouri 1.479 1.183 1.376 1.101

13 Virginia 1.557 1.246 1.448 1.158

14

Delaware, District of 

Columbia, Maryland, 

West Virginia 1.498 1.198 1.393 1.114

15 Georgia 1.474 1.179 1.371 1.096

16

North Carolina, South 

Carolina 1.501 1.201 1.396 1.117

17 Florida 1.512 1.210 1.407 1.125

18

Alabama, Kentucky, 

Mississippi 1.526 1.220 1.419 1.135

19 Tennessee 1.477 1.182 1.374 1.099

20

Arkansas, Louisiana, 

Oklahoma 1.542 1.233 1.434 1.147

21 Texas 1.498 1.198 1.393 1.115

22 Colorado 1.531 1.225 1.424 1.139

23

Idaho, Montana, Utah, 

Wyoming 1.491 1.192 1.386 1.109

24 Arizona 1.580 1.264 1.470 1.176

25 Nevada, New Mexico 1.537 1.230 1.430 1.144

26 California 1.607 1.286 1.495 1.196

27a Oregon, Washington 1.580 1.264 1.469 1.175

27b Alaska 1.766 1.413 1.642 1.314

27c Hawaii 1.835 1.468 1.707 1.366
6-16

6.5.1.3 Estimation of Regional General Contractor Markups

In order to derive regional general contractor markups for the residential building 

construction sector from the 2007 Economic Census, DOE combined four Geographic Area 

Series: (1) New Single-Family General Contractors (NAICS 236115), (2) New Multifamily 

Housing Construction (NAICS 236116), (3) New Housing Operative Builders (NAICS 236117), 

and (4) Residential Remodelers (NAICS 236118). Each series consists of statewide cost data 

required to calculate baseline markups for each state as illustrated in Section 6.1.1. Although 

there is only a new construction (no replacement) channel for general contractors, the same 

technique shown for mechanical contractors can still be employed to estimate regional baseline 

and incremental markups. First, DOE estimated the statewide incremental markups by applying 

the ratio of national baseline and incremental markups (i.e. the national incremental markup is 

around 9.46 percent lower than the national baseline markup) to the baseline markups for each 

state. Lastly, DOE divided all states among the 29 RECS regions and then calculated populationweighted average baseline and incremental markups for general contractors for each region. The 

final results are summarized in Table 6.5.3.
6-17

Table 6.5.3 Regional General Contractor Markups for Furnaces 

RECS 

Region State(s)

Baseline 

MU

Incremental 

MU

1

Connecticut, Maine, New Hampshire, Rhode Island, 

Vermont 1.410 1.277

2 Massachusetts 1.343 1.216

3 New York 1.393 1.261

4 New Jersey 1.503 1.361

5 Pennsylvania 1.362 1.233

6 Illinois 1.589 1.438

7 Indiana, Ohio 1.378 1.248

8 Michigan 1.537 1.392

9 Wisconsin 1.340 1.213

10 Iowa, Minnesota, North Dakota, South Dakota 1.372 1.243

11 Kansas, Nebraska 1.351 1.223

12 Missouri 1.325 1.200

13 Virginia 1.450 1.313

14 Delaware, District of Columbia, Maryland, West Virginia 1.443 1.307

15 Georgia 1.428 1.293

16 North Carolina, South Carolina 1.390 1.258

17 Florida 1.528 1.384

18 Alabama, Kentucky, Mississippi 1.355 1.227

19 Tennessee 1.353 1.225

20 Arkansas, Louisiana, Oklahoma 1.373 1.243

21 Texas 1.499 1.357

22 Colorado 1.499 1.357

23 Idaho, Montana, Utah, Wyoming 1.308 1.184

24 Arizona 1.707 1.546

25 Nevada, New Mexico 1.637 1.482

26 California 1.717 1.555

27a Oregon, Washington 1.464 1.325

27b Alaska 1.854 1.678

27c Hawaii 1.417 1.283

6.6 MARKUP FOR MANUFACTURED HOME GAS FURNACES

Based on the shipments forecast for 2018 (see chapter 9), 50 percent of the manufactured

home gas furnaces go to new construction, and the other 50 percent go to replacements. DOE 

used Manufactured Home (Mobile Home) Manufacturing (NAICS 321991) sector( (14) and All 
6-18

Other Specialty Trade Contractors (NAICS 238990) sector (15) from the 2007 Economic Census 

to calculate markups for manufactured home gas furnace manufacturers and contractors 

respectively. The first industrial series includes revenue and expenses associated with making 

manufactured homes, and the second series accounts expenses and revenue associated with 

performing manufactured (mobile) home setup and tie-down work for new construction. The 

detailed cost breakdown for manufactured home manufacturers and contractors and the final 

estimates for both baseline and incremental markups are listed in Table 6.6.1 and Table 6.6.2. 

Table 6.6.1 Manufactured Home Manufacturer Expenses and Markups for New 

Construction

Description

Manufactured Home Manufacturer 

Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.71 1.00

Labor Expenses: Salaries (indirect) and benefits 0.08 0.11

Occupancy Expense: Rent, maintenance, and utilities 0.01 0.02

Other Operating Expenses: Depreciation, advertising, and insurance. 0.09 0.13

Net Profit Before Taxes 0.11 0.15

Baseline Markup (MUMANUFACTURED HOME BASE): Revenue per dollar cost of goods 1.41

Incremental Markup (MUMANUFACTURED HOME INCR): Increased revenue per dollar increase cost of 

goods sold

1.28

Source: U.S. Census Bureau. 2007. Manufactured Home (Mobile Home) Manufacturing. Sector 31: 321991. Manufacturing: 

Industry Series: Preliminary Detailed Statistics for Establishments: 2007

As shown in the first column, the direct cost of sales represents about $0.71 per dollar 

sales revenue to the manufactured home contractor. Labor expenses represent $0.08 per dollar 

sales revenue, occupancy expenses represent $0.01 per dollar sales revenue, other operating 

expenses represent $0.09, and profit makes up $0.11 per dollar sales revenue. DOE then 

converted these expenses per dollar sales into revenue per dollar cost of goods sold, by dividing 

each figure in the first data column by $0.71. The data in column two show that, for every $1.00 

the manufactured home gas furnace manufacturer spends on equipment costs, the manufactured

home gas furnace manufacturer earns $1.00 in sales revenue to cover the equipment cost, $0.11 

to cover labor costs, $0.02 to cover occupancy expenses, $0.13 for other operating expenses, and 

$0.15 in profits. Thus, the manufacturer baseline markup for manufactured home gas furnaces 

(MUMANUFACTURED HOME MFG BASE) is 1.41. DOE believes the labor and occupancy costs to be invariant 

and the other operating costs and profit to scale with the equipment price (i.e., be variant). In this 

case, for a $1.00 increase in the equipment price, the manufacturer price for manufactured home 

gas furnaces will increase by $1.28, giving a manufactured home gas furnace manufacturer

incremental markup (MUMANUFACTURED HOME MFG INCR) of 1.28.
6-19

Table 6.6.2 Manufactured Home Contractor Expenses and Markups for New 

Construction

Description

Manufactured Home Contractor 

Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.62 1.00

Labor Expenses: Salaries (indirect) and benefits 0.15 0.24

Occupancy Expense: Rent, maintenance, and utilities 0.03 0.05

Other Operating Expenses: Depreciation, advertising, and insurance. 0.11 0.18

Net Profit Before Taxes 0.08 0.13

Baseline Markup (MUMANUFACTURED HOME BASE): Revenue per dollar cost of goods 1.61

Incremental Markup (MUMANUFACTURED HOME INCR): Increased revenue per dollar increase cost of 

goods sold

1.31

Source: U.S. Census Bureau. 2007. All Other Specialty Trade Contractors. Sector 23: 238990. Construction: Industry Series: 

Preliminary Detailed Statistics for Establishments: 2007.

Analogously, DOE calculated these expenses per dollar sales into revenue per dollar cost

of goods sold, by dividing each figure in the first data column by $0.62. The data in column two 

show that, for every $1.00 the manufactured home gas furnace contractor spends on equipment 

costs, the manufactured home gas furnace contractor earns $1.00 in sales revenue to cover the 

equipment cost, $0.24 to cover labor costs, $0.05 to cover occupancy expenses, $0.18 for other 

operating expenses, and $0.13 in profits. Thus, the contractor baseline markup for manufactured

home gas furnaces (MUMANUFACTURED HOME CONT BASE) is 1.61. DOE used the same assumption that the 

labor and occupancy costs are invariant and the other operating costs and profit to scale with the 

equipment price (i.e., be variant). In this case, for a $1.00 increase in the equipment price, the

contractor price for manufactured home gas furnace will increase by $1.31, giving a 

manufactured home gas furnace contractor incremental markup (MUMANUFACTURED HOME CONT INCR) of 

1.31.

Based on the distribution channel for manufactured home furnaces in the new 

construction market that DOE described in Figure 6.1.2, in order to derive the final retail price 

for manufactured home gas furnaces, the total markup applied on the manufacturing price of 

heating equipment equals the product of manufacturer markup and contractor markup for 

manufactured home gas furnaces. In this case, the baseline and incremental markups for 

manufactured home gas furnaces installed for new construction are 2.27 and 1.68 respectively. 

As for those units purchased for replacement, DOE used the same baseline and incremental 

markups estimated for non-weatherized gas furnaces to apply to the manufacturing price of 

heating equipment, which are 2.11 and 1.37 respectively.
6-20

6.7 SALES TAX

The sales tax represents state and local sales taxes that are applied to the consumer price 

of the equipment. The sales tax is a multiplicative factor that increases the consumer equipment 

price.

DOE derived state and local taxes from data provided by the Sales Tax Clearinghouse. (16)

These data represent weighted averages that include county and city rates. DOE then derived 

population-weighted average tax values for each RECS region to match the regional markups for 

wholesalers and mechanical and general contractors, as shown in Table 6.7.1. Detailed sales tax 

data by each state can be found in appendix 6-A.6.
6-21

Table 6.7.1 Average Sales Tax Rates by RECS Region

RECS 

Region

State(s) Population

(July 2011)

Tax Rate (2012)

%

1 Connecticut, Maine, New 

Hampshire, Rhode Island, Vermont

7,904,824 5.13

2 Massachusetts 6,587,536 6.25

3 New York 19,465,197 8.45

4 New Jersey 8,821,155 6.95

5 Pennsylvania 12,742,886 6.40

6 Illinois 12,869,257 8.10

7 Indiana, Ohio 18,061,873 6.87

8 Michigan 9,876,187 6.00

9 Wisconsin 5,711,767 5.45

10 Iowa, Minnesota, North Dakota, 

South Dakota

9,915,184 6.86

11 Kansas, Nebraska 4,713,879 7.25

12 Missouri 6,010,688 7.25

13 Virginia 8,096,604 5.00

14 Delaware, District of Columbia, 

Maryland, West Virginia

8,919,645 5.59

15 Georgia 9,815,210 6.90

16 North Carolina, South Carolina 14,335,631 6.95

17 Florida 19,057,542 6.65

18 Alabama, Kentucky, Mississippi 12,150,608 7.13

19 Tennessee 6,403,353 9.45

20 Arkansas, Louisiana, Oklahoma 11,304,323 8.46

21 Texas 25,674,681 8.00

22 Colorado 5,116,796 6.40

23 Idaho, Montana, Utah, Wyoming 5,968,564 5.28

24 Arizona 6,482,505 8.15

25 Nevada, New Mexico 4,805,546 7.31

26 California 37,691,912 8.20

27a Oregon, Washington 10,701,897 5.62

27b Alaska 722,718 1.45

27c Hawaii 1,374,810 4.40

Population Weighted Average 7.11
6-22

6.8 OVERALL MARKUPS 

The overall markup for each distribution channel is the product of the appropriate 

markups, as well as sales tax in the case of replacement applications (Table 6.8.1). 

DOE used the overall baseline markup to estimate the consumer product price of baseline 

models, given the manufacturer cost of the baseline models. As stated previously, DOE considers 

baseline models to be product sold under existing market conditions (i.e., without new energy 

conservation standards). The following equation shows how DOE used the overall baseline 

markup to determine the product price for baseline models.

( ) CPPBASE = COSTMFG × MU MFG × MUBASE ×TaxSALES = COSTMFG × MUOVERALL _ BASE

Where:

CPPBASE = consumer product price for baseline models,

COSTMFG = manufacturer cost for baseline models,

MUMFG = manufacturer markup,

MUBASE = baseline replacement or new home channel markup,

TaxSALES = sales tax (replacement applications only), and

MUOVERALL_BASE = baseline overall markup.

Similarly, DOE used the overall incremental markup to estimate changes in the consumer 

product price, given changes in the manufacturer cost from the baseline model cost resulting 

from an energy conservation standard to raise product energy efficiency. The total consumer 

product price for more energy-efficient models is composed of two components: the consumer 

product price of the baseline model and the change in consumer product price associated with the 

increase in manufacturer cost to meet the new energy conservation standard. The following 

equation shows how DOE used the overall incremental markup to determine the consumer 

product price for more energy-efficient models (i.e., models meeting new energy conservation 

standards). 

( )

BASE MFG OVERALL INCR

STD MFG OVERALL BASE MFG MFG INCR SALES

CPP COST MU

CPP COST MU COST MU MU Tax

_

_

= + ∆ ×

= × + ∆ × × ×

Where:

CPPSTD = consumer product price for models meeting new energy 

conservation standards,

CPPBASE = consumer product price for baseline models, 

COSTMFG = manufacturer cost for baseline models,

ΔCOSTMFG = change in manufacturer cost for higher energy efficient models,

MUMFG = manufacturer markup,
6-23

MUINCR = incremental replacement or new home channel markup,

TaxSALES = sales tax (replacement applications only),

MUOVERALL_BASE = baseline overall markup (product of manufacturer markup, baseline 

replacement or new home channel markup, and sales tax), and

MUOVERALL_INCR = incremental overall markup.

National average baseline and incremental markups for each market participant are 

summarized in Table 6.8.1 and Table 6.8.2 for non-manufactured home furnace fans and 

manufactured home furnace fans, respectively. Based on furnace shipment forecasts for the year 

2018 (see chapter 9), DOE estimated that 25 percent of gas and electric furnaces, 50 percent of 

manufactured home gas and electric furnaces, 10 percent of oil-fired furnaces, and 25 percent of 

hydronic air handlers go to new construction. On the other hand, 75 percent of gas and electric

furnaces, 50 percent of manufactured home gas and electric furnaces, 90 percent of oil-fired 

furnaces, and 75 percent of hydronic air handlers go to the replacement market. By weighing the 

markups by the market shares for each type of furnace and market, total markups are listed in 

Table 6.8.3

Table 6.8.1 Summary of National Average Markups on Non-Manufactured Home

Furnace Fans

Baseline Markup Incremental Markup

Manufacturer 1.35 1.35

Wholesaler 1.36 1.11

Mechanical Contractor 

(new construction/replacement)

1.44/1.55 1.15/1.23

General Contractor 

(new construction only)

1.48 1.34

Sales Tax 1.071 1.071
6-24

Table 6.8.2 Summary of National Average Markups on Manufactured Home Furnace

Fans

Baseline Markup Incremental Markup

Manufacturer 1.30 1.30

Wholesaler (replacement only) 1.36 1.11

Mechanical Contractor 

(replacement only)

1.55 1.23

Manufactured Home Manufacturer

(new construction only)

1.41 1.28

Manufactured Home Contractor 

(new construction only)

1.61 1.31

Sales Tax 1.071 1.071

Table 6.8.3 Summary of Total Markup by Furnace Fan Product Class 

Product Class Baseline Markup Incremental Markup

Non-weatherized, Non-condensing Gas 

Furnaces

2.49 1.59

Non-weatherized, Condensing Gas 

Furnaces

2.45 1.54

Weatherized Gas Furnace 2.46 1.57

Oil Furnace 2.30 1.46

Electric Furnace / Modular Blower 2.41 1.54

Manufactured Home Non-weatherized, 

Non-condensing Gas Furnaces

3.04 2.35

Manufactured Home Non-weatherized, 

Condensing Gas Furnaces

2.96 2.29

Manufactured Home Electric Furnace 

/Modular Blower

2.95 2.28

Hydronic Air Handler (Heat/Cool) 2.62 1.65
6-25

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6-26

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