### APPENDIX C. DETAILED DATA FOR EQUIPMENT PRICE MARKUPS

TABLE OF CONTENTS

C.1 INTRODUCTION

........................................................................................................... C-1 C.2 DETAILED WHOLESA LER COST DATA

.................................................................. C-1 C.3 DETAILED MECHANICAL CONTRACTOR DATA

.................................................. C-2 C.4 ESTIMATION OF WHOLESALER AND MECHANICAL CONTRACTOR MARKUP STANDARD DEVIATIONS

........................................................................ C-2

LIST OF TABLES Table C.2.1 Disaggregated Costs and Expenses for Wholesalers

.............................................. C-1 Table C.3.1 Mechanical Contractor Expenses and Markups Used to Scale the Incremental Markups

.................................................................................................................. C-2 Table C.4.1 Wholesaler Incrementa l Markup Standard Deviation

............................................. C-3 Table C.4.2 Mechanical Contractor Baseline Markups by State, 2002

...................................... C-3

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### APPENDIX C. DETAILED DATA FOR EQUIPMENT PRICE MARKUPS

C.1 INTRODUCTION This appendix provides further details on information presented in Chapter 6, Markups for Equipment Price Determination.

C.2 DETAILED WHOLESALER COST DATA Table 6.3.1 of Chapter 6, section 6.3, shows wholesaler revenues and costs in aggregated form. These data are based on the 2008 Profit Report (2007 Data) of the Heating Airconditioning & Refrigeration Di stributors International (HARD I). Table C.2.1 provides the complete breakdown of costs and expenses as provided in the 2008 Pr ofit Report (2007 Data). The column labeled “Scaling” in Table C.2.1 indica tes which expenses were assumed to scale with only the baseline markup and which were assumed to scale with both the baseline and incremental markups. As described in Chapter 6, section 6.3, only those expe nses that scale with baseline and incremental costs are marked up when there is an incremental change in equipment costs. Table C.2.1 Disaggregated Costs and Expenses for Wholesalers*

Item Percent of Revenue Scaling Cost of Goods Sold Gross Margin 73.0% 27.0% Payroll Expenses 15.6% Baseline

Executive Salaries & Bonuses 3.2% Branch Manager Salaries and Bonuses 1.3% Sales Executive Salaries & Commissions 0.5% Outside Sales Salaries & Commissions 2.3% Inside/Counter Sales/Wages 2.6% Purchasing Salaries/Wages 0.4% Credit Salaries/Wages 0.2% IT Salaries/Wages 0.2% Warehouse Salaries/Wages 1.7% Delivery Salaries/Wages 0.7% All Other Salaries/Wages & Bonuses 1.2% Payroll Taxes 1.1% Group Insurance 1.1% Benefit Plans 0.4% Occupancy Expenses 3.1% Baseline

Utilities: Heat, Light, Power, Water 0.4% Telephone 0.3% Building Repairs & Maintenance 0.2% Rent or Ownership in Real Estate 2.2% Other Operating Expenses 5.2% Baseline & Incremental

Advertising & Promotion 0.5% Insurance (business liability & casualty) 0.2% Depreciation 0.4% Vehicle Expenses 1.1% Personal Property Taxes/Licenses 0.1% Bad Debt Losses 0.3% All Other Operating Expenses 2.6% Total Operating Expenses 23.9% Operating Profit

Other Income Interest Expense 3.1% 0.5% 0.9% Baseline & Incremental

C-1Other Non-operating Expenses 0.0% Profit Before Taxes 3.2%

* Source: Heating, Airconditioning & Re frigeration Distributors Internationa l. 2008. 2008 Profit Report 2007 Data). Note: The wholesaler costs and expenses are percentage values as opposed to the per dollar of sales revenue values shown in Ta ble 6.3.1. 

### C.3 DETAILED MECHANICAL CONTRACTOR DATA Table 6.4.1 of Chapter 6, section 6.4, shows mechanical contractor revenues and costs in aggregated form. This table is based on U.S. Census Bureau data. Table C.3.1 shows the complete breakdown of costs and expenses provided by the U.S. Census Bureau. The column labeled “Scaling” in Table C.3.1 indicates which expenses were assumed to scale with only the baseline markup and which were assumed to s cale with both the baseline and incremental markups. As described in Chapter 6, section 6.3, only those expenses that scale with baseline and incremental costs are marked up when there is an incremental change in equipment costs.

Table C.3.1 Mechanical Contractor Expenses a nd Markups Used to Scale the Incremental Markups*

Item Dollar Value Percentage Scaling Total Cost of Equipment Sales

Cost of materials, components, and supplies Payroll, construction workers Cost of construction work subcontracted out to others Cost of selected power, fuels, and lubricants $77,482,735 $37,813,136 $25,619,932 $12,462,622

$1,587,045 66.01% 32.21% 21.83% 10.62%

1.35% Baseline

Gross Margin $39,898,412 33.99% Payroll Expenses Fringe benefits, all employees Payroll, other employees $19,648,990 $9,326,660 $10,322,330 16.74% 7.95% 8.79% Baseline

Occupancy Expenses Rental cost for machinery, equipment, and buildings + Purchased communication services $2,926,539 2.49% Baseline Other Operating Expenses Depreciation charges during year Cost of repairs to buildings and other structures + Cost of repairs to machinery and equipment $2,969,716 $1,666,352 $1,303,364 2.53% 1.42% 1.11% Baseline & Incremental

Net Profit Before Income Taxes $14,353,167 12.23% Baseline & Incremental

* Source: U.S. Census Bureau. 2002. Plumbing, Heating, a nd Air-Conditioning Contractors: 2002. Report EC02-231-238220, Table 4. Detailed Statistics for Establishments: 2002. Note: Mechanical contractor costs and expenses are first presented as total dollar values and then converted to percentage values. This is in contrast to the per dollar of sales revenue values shown in Table 6.4.1. 

### C.4 ESTIMATION OF WHOLESALER AND MECHANICAL CONTRACTOR MARKUP STANDARD DEVIATIONS The U.S Department of Energy (DOE) used U.S. Census survey data to estimate commercial refrigeration equipmen t wholesaler and mechanical c ontractor markup distributions. In the case of wholesalers, survey data were av ailable only at the national level. In the case of mechanical contractors, the survey data include state-level plumbing, heating, and air conditioning data for total value of work, num ber of firms, cost of goods sold, cost of subcontract work, cost of ma terials, and construction payr oll, as shown in Table C.4.1 and Table C.4.2.

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### DOE estimated the size of the baseline mar kup distribution from the standard deviation of across-state markups. The wholesale markup st andard deviation is 0.06, and the mechanical contractor markup standard devi ation is 0.06. DOE defined the re lative standard deviation as a percent of the baseline markup. The relative standard deviations fo r the wholesaler and mechanical contractor markups are 4.2 and 4.0 pe rcent of their respective baseline markups.

DOE also assumed that wholesaler and mechan ical contractor incremental markups have the same relative standard deviat ion as wholesaler and mechanical contractor base line markups. This assumption was used to calculate the sta ndard deviation of wholesaler and mechanical contractor incremental markups. This analysis was done to unders tand the level of variability in the wholesaler and mechanical contractor markups. In the case of the contractor markups, the variation in contractor markup by state is captured explicitly in the subsequent life-cycle cost (LCC) analysis. Random variation in wholesal er markups, however, has not been introduced into the LCC analysis. Table C.4.1 Wholesaler Incremental Markup Standard Deviation*

Number of Firms Sales ($000) Cost of Goods Sold ($000) Gross Margin ($000) 5,180 17,715,524 Cv for 4237 = 1.6% 12,789,493 4,627,533 Cv for 4237 = 7.7% Since Cv = σ / μ , σ = Cv / μ = 0.077 / 1.37 = 0.06 Where: Cv = Coefficient of variation

σ = Standard deviation μ

= mean value

* Sources: U.S. Census Bureau. 2005. Sector 42: Wholesale Trad e: Subject Series - Misc Subjects: Gross Margin and its Compon ents for Merchant Wholesalers for the United States: 2002 @ http://factfinder.census.gov/servlet/IBQ Table?_bm=y&-geo_id=&-_skip=0 &

- ds_name=EC0242SXSB06&-_lang=en U.S. Census Bureau. 2005. Annual Report for Wholesale Trade: 2002-2003. Report BW(MSBO)/04-A. http://www.census.gov/svsd/www/msbo2003.pdf U.S. Census Bureau. 2005. Table 4. Estimated Coefficients of Variation of Annual Sales, End-of -Year Inventories, Purchases, G ross Margins, and Gross Margin/Sales Ratios for Merchant Wholesalers, ex cluding Manufacturers' Sales Branches and Offices (MSBOs) @ http://www.census.gov/svsd/www/atstable4.txt Notes: The data are at the national level. NAICS 4237 applies to Hardware, plumbing & h eating equipment & supply merchant wholes alers and 42373 applies to Warm-air heatin g & AC equipment merchant wholesalers. Cv = coefficient of variation. 

### Table C.4.2 Mechanical Contractor Baseline Markups by State, 2002*

State Number of Firms Value of Construction ($000) Cost of Subcontract Work ($000) Cost of Materials

($000) Construction Payroll ($000) Baseline Markup Alabama 1 , 425 1 , 490 , 919 151 , 240 547 , 075 308 , 967 1.48 Alaska 398 687 , 319 80 , 919 196 , 594 149 , 576 1.61 Arizona 1 , 510 1 , 958 , 430 141 , 885 776 , 733 420 , 945 1.46 Arkansas 1 , 045 799 , 157 65 , 491 305 , 198 154 , 099 1.52 California 7 , 272 12 , 346 , 970 1 , 172 , 183 4 , 018 , 408 2 , 701 , 227 1.56 Colorado 2 , 015 2 , 354 , 183 235 , 012 821 , 432 547 , 419 1.47 Connecticu t 1 , 321 1 , 580 , 361 156 , 607 505 , 340 320 , 528 1.61 Delaware 306 460 , 330 42 , 001 150 , 096 112 , 360 1.51 Dis t rict of Columbia 1.49 Florida 5 , 069 6 , 255 , 428 616 , 097 2 , 270 , 555 1 , 263 , 030 1.51 Geor g ia 2 , 534 3 , 436 , 673 380 , 819 1 , 226 , 368 653 , 972 1.52

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### Table C.4.2 (contd)

State Number of Firms Value of Construction ($000) Cost of Subcontract Work ($000) Cost of Materials

($000) Construction Payroll ($000) Baseline Markup Hawaii 280 358 , 921 36 , 053 129 , 870 65 , 305 1.55 Idaho 594 546 , 349 47 , 466 211 , 341 133 , 160 1.39 Illinois 3 , 848 6 , 112 , 025 605 , 868 1 , 770 , 254 1 , 504 , 166 1.58 Indiana 1 , 867 2 , 964 , 787 418 , 904 869 , 816 753 , 388 1.45 Iowa 1 , 066 1 , 189 , 684 133 , 934 428 , 842 265 , 529 1.44 Kansas 966 1 , 236 , 292 155 , 011 431 , 331 264 , 876 1.45 Kentuck y 1 , 219 1 , 357 , 063 121 , 960 469 , 639 307 , 205 1.51 Louisiana 1 , 469 1 , 439 , 726 174 , 283 497 , 169 291 , 819 1.49 Maine 458 393 , 322 36 , 149 138 , 587 76 , 034 1.57 Mar y land 2 , 024 3 , 902 , 613 583 , 237 1 , 251 , 986 797 , 428 1.48 Massachusetts 2 , 520 3 , 531 , 662 503 , 155 1 , 038 , 151 713 , 798 1.57 Michi g an 3 , 051 4 , 334 , 221 492 , 957 1 , 338 , 229 957 , 980 1.55 Minnesota 1 , 635 2 , 860 , 054 280 , 556 958 , 849 599 , 935 1.55 Mississi pp i 655 754 , 652 70 , 985 283 , 993 132 , 824 1.55 Missouri 1 , 816 2 , 538 , 706 276 , 621 849 , 770 581 , 090 1.49 Montana 432 356 , 269 44 , 987 135 , 009 68 , 332 1.43 N ebraska 683 819 , 918 90 , 582 321 , 124 177 , 052 1.39 N evada 498 1 , 093 , 329 78 , 259 350 , 851 236 , 089 1.64 N ew Ham p shire 531 535 , 046 52 , 209 179 , 259 123 , 215 1.51 N ew Jerse y 3 , 551 4 , 210 , 275 466 , 668 1 , 230 , 617 949 , 465 1.59 N ew Mexico 599 543 , 713 51 , 116 191 , 757 104 , 423 1.57 N ew Yor k 5 , 750 7 , 561 , 952 949 , 038 2 , 335 , 220 1 , 595 , 864 1.55 N orth Carolina 2 , 978 3 , 231 , 394 339 , 388 1 , 127 , 518 684 , 958 1.50 N orth Dakota 272 291 , 850 34 , 971 105 , 405 66 , 002 1.41 Ohio 3 , 514 4 , 611 , 590 502 , 061 1 , 470 , 907 1 , 037 , 116 1.53 Oklahoma 1 , 158 906 , 621 77 , 207 341 , 921 185 , 111 1.50 Ore g on 1 , 031 1 , 440 , 390 132 , 523 506 , 559 332 , 135 1.48 Penns y lvania 3 , 653 5 , 929 , 629 639 , 074 1 , 766 , 004 1 , 193 , 465 1.65 Rhode Island 397 490 , 872 60 , 217 171 , 994 99 , 426 1.48 South Carolina 1 , 472 1 , 395 , 359 111 , 394 518 , 386 327 , 238 1.46 South Dakota 337 333 , 758 22 , 754 141 , 297 58 , 708 1.50 Tennessee 1 , 370 2 , 292 , 875 201 , 748 846 , 426 459 , 475 1.52 Texas 5 , 653 8 , 061 , 607 807 , 501 2 , 889 , 320 1 , 746 , 739 1.48 Utah 892 1 , 010 , 317 113 , 775 353 , 958 202 , 682 1.51 Vermon t 282 208 , 056 19 , 987 77 , 251 43 , 158 1.48 Vir g inia 2 , 547 3 , 036 , 417 254 , 085 1 , 074 , 309 700 , 273 1.50 Washin g ton 1 , 602 2 , 344 , 257 222 , 282 773 , 211 543 , 668 1.52 West Vir g inia 786 720 , 324 39 , 465 200 , 111 215 , 363 1.58 Wisconsin 1 , 839 2 , 578 , 014 193 , 399 941 , 806 617 , 852 1.47 W y omin g 1.49 Avera g e Baseline Marku p 1.51 Standard Deviation 0.06

* Sources: U.S. Census Bureau. 2005. 2002 Economic Census Cons truction Geographic Area Series. Reports EC02-23A-AL, EC02-23A -AK, EC02-23A-AZ, EC02-23A-AR, EC02-23A-CA, EC02-23A-CO, EC02-23A -CT, EC02-23A-DE, EC02-23A-FL, EC02-23A-GA, EC02-23A-HI, EC02-23A-ID, EC02-23A-IL, EC02-23A-IN, EC02-23A-IA, EC02-23A-KS, EC02-23A-KY, EC02-23A-LA, EC02-23A-ME, EC02-23A-MD, EC02-23A-MA, EC02-23A-MI, EC02-23A-MN, EC02-23A-MS, EC02- 23A-MO, EC02-23A-MT, EC02-23A-NE, EC02-23A-NV, EC02-23A

NH, EC02-23A-NJ, EC02-23A-NM, EC02-23A-NY, EC02-23A-NC, EC 02-23A-ND, EC02-23A-OH, EC02-23A-OK, EC02-23A-OR, EC02

- 23A-PA, EC02-23A-RI, EC02-23A-SC, EC02-23A-SD, EC02-23A-TN, EC02-23A-TX, EC02-23A-UT, EC02-23A-VT, EC02-23A-VA, EC02

- 23A-WA, EC02-23A-WV, EC02-23A-WI. Notes: The U.S. Census Bureau withheld data at the Plumbing, Heating, and Air Conditioning C ontractor level (23822) for Alaska , District of Columbia, West Virginia, and Wyoming. Data for Building Equipment Contractors (2382) we re used for Alaska and West Virginia; t he average markup value for Maryland and Virginia was used for the District of Columbia, and the average markup value for Colorado and Uta h was used for Wyoming. Markups may vary across states for several reasons, including differences in firm size.

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