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APPENDIX C. DETAILED DATA FOR EQUIPMENT PRICE MARKUPS 

TABLE OF CONTENTS 

C.1 INTRODUCTION ...........................................................................................................C-1 

C.2 DETAILED WHOLESALER 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 Incremental 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 2005 Profit Report (2004 Data) of the Heating 

Airconditioning & Refrigeration Distributors International (HARDI). Table C.2.1 provides the 

complete breakdown of costs and expenses as provided in the 2005 Profit Report (2004 Data). 

The column labeled “Scaling” in Table C.2.1 indicates 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 expenses 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 69.8% 

Gross Margin 30.2% 

Payroll Expenses 19.5% 

Executive Salaries & Bonuses 3.5% 

Sales Executive Salaries & Commissions 0.5% 

Outside Sales Salaries & Commissions 2.9% 

Inside/Counter Sales/Wages 5.5% 

Warehouse Salaries/Wages 0.9% 

Delivery Salaries/Wages 0.3% 

All Other Salaries/Wages & Bonuses 2.6% 

Payroll Taxes 1.3% 

Group Insurance 1.4% 

Benefit Plans 0.6% 

Baseline 

Occupancy Expenses 3.4% 

Utilities: Heat, Light, Power, Water 0.4% 

Telephone 0.4% 

Building Repairs & Maintenance 0.2% 

Rent or Ownership in Real Estate 2.4% 

Baseline 

Other Operating Expenses 4.3% 

Advertising & Promotion 0.3% 

Insurance (business liability & casualty) 0.2% 

Depreciation 0.3% 

Vehicle Expenses 0.8% 

Personal Property Taxes/Licenses 0.1% 

Bad Debt Losses 0.1% 

All Other Operating Expenses 2.5% 

Baseline & Incremental 

Total Operating Expenses 27.2% 

Operating Profit 3.0% Baseline & Incremental 

Other Income 0.7% 

Interest Expense 0.5% 

Other Non-operating Expenses 0.0% 

Profit Before Taxes 3.2% 

* Source: Heating, Airconditioning & Refrigeration Distributors International. 2005. 2005 Profit Report (2004 Data). 

Note: The wholesaler costs and expenses are percentage values as opposed to the per dollar of sales revenue values shown in Table 6.3.1. 

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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 scale 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 and Markups Used to Scale the Incremental 

Markups* 

Item Dollar Value Percentage Scaling 

Total Cost of Equipment Sales $77,482,735 66.01% 

Cost of materials, components, and supplies $37,813,136 32.21% 

Payroll, construction workers $25,619,932 21.83% 

Cost of construction work subcontracted out to others $12,462,622 10.62% 

Cost of selected power, fuels, and lubricants $1,587,045 1.35% 

Baseline 

Gross Margin $39,898,412 33.99% 

Payroll Expenses $19,648,990 16.74%

Fringe benefits, all employees $9,326,660 7.95% 

Payroll, other employees $10,322,330 8.79% 

Baseline 

Occupancy Expenses 

Rental cost for machinery, equipment, and buildings + 

Purchased communication services 

$2,926,539 2.49% Baseline 

Other Operating Expenses $2,969,716 2.53%

Depreciation charges during year $1,666,352 1.42% 

Cost of repairs to buildings and other structures + Cost 

of repairs to machinery and equipment $1,303,364 1.11% 

Baseline & 

Incremental 

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

Incremental 

* Source: U.S. Census Bureau. 2002. Plumbing, Heating, and 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 equipment wholesaler and mechanical contractor markup distributions. 

In the case of wholesalers, survey data were available only at the national level. In the case of 

mechanical contractors, the survey data includes state-level plumbing, heating, and air 

conditioning data for total value of work, number of firms, cost of goods sold, cost of 

subcontract work, cost of materials, and construction payroll, as shown in Table C.4.1 

and Table C.4.2. 

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DOE estimated the size of the baseline markup distribution from the standard deviation 

of across-state markups. The wholesale markup standard deviation is 0.06, and the mechanical 

contractor markup standard deviation is 0.06. DOE defined the relative standard deviation as the 

standard deviation as a percent of the baseline markup. The relative standard deviations for the 

wholesaler and mechanical contractor markups are 4.2 and 4.0 percent of their respective 

baseline markups. 

DOE also assumed that wholesaler and mechanical contractor incremental markups have 

the same relative standard deviation as wholesaler and mechanical contractor baseline markups. 

This assumption was used to calculate the standard deviation of wholesaler and mechanical 

contractor incremental markups. This analysis was done to understand 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 wholesaler 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 Trade: Subject Series - Misc Subjects: Gross Margin and its Components for 

Merchant Wholesalers for the United States: 2002 @ http://factfinder.census.gov/servlet/IBQTable?_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, Gross Margins, 

and Gross Margin/Sales Ratios for Merchant Wholesalers, excluding 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 & heating equipment & supply merchant wholesalers and 42373 applies to Warm-air heating & 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

Connecticut 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

District of Columbia 1.49

Florida 5,069 6,255,428 616,097 2,270,555 1,263,030 1.51

Georgia 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

Kentucky 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

Maryland 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

Michigan 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

Mississippi 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

Nebraska 683 819,918 90,582 321,124 177,052 1.39

Nevada 498 1,093,329 78,259 350,851 236,089 1.64

New Hampshire 531 535,046 52,209 179,259 123,215 1.51

New Jersey 3,551 4,210,275 466,668 1,230,617 949,465 1.59

New Mexico 599 543,713 51,116 191,757 104,423 1.57

New York 5,750 7,561,952 949,038 2,335,220 1,595,864 1.55

North Carolina 2,978 3,231,394 339,388 1,127,518 684,958 1.50

North 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

Oregon 1,031 1,440,390 132,523 506,559 332,135 1.48

Pennsylvania 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

Vermont 282 208,056 19,987 77,251 43,158 1.48

Virginia 2,547 3,036,417 254,085 1,074,309 700,273 1.50

Washington 1,602 2,344,257 222,282 773,211 543,668 1.52

West Virginia 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

Wyoming 1.49

Average Baseline Markup 1.51

Standard Deviation 0.06

* Sources: U.S. Census Bureau. 2005. 2002 Economic Census Construction 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, EC02-23ANH, EC02-23A-NJ, EC02-23A-NM, EC02-23A-NY, EC02-23A-NC, EC02-23A-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 Contractor level (23822) for Alaska, District of 

Columbia, West Virginia, and Wyoming. Data for Building Equipment Contractors (2382) were used for Alaska and West Virginia; the average 

markup value for Maryland and Virginia was used for the District of Columbia, and the average markup value for Colorado and Utah was used 

for Wyoming. 

Markups may vary across states for several reasons, including differences in firm size. 

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