labor rate / overhead calcs

"RaceBikesOrWork" a écrit dans le message de news: snipped-for-privacy@b75g2000hsg.googlegroups.com...

Consider the hours you bill (production), and everything necessary to make it work:

- Hours: commercial, accounting, your boss.... On top of that, add social security (health), unenployment, retirement,... (where that applies)

- Fix costs : building, heating, light, insurances,...

- Taxes,

-...

2) Equipment overhead and depreciation + utilities + mortgage expenses + insurance.

Add up all the expenses from 1+2+3 above and that will dictate the minimum per hour charge assuming something less than a full 2080 work year because of sick leave, vacation, overhead charges (meetings, for example), and the general break time throughout the day.

If the average pay rate is $11 / hour and he thinks his labor costs are about $30 / hour, I'm guessing he is greatly underestimating his expenses, or he's got a great business model.

For a quick and dirty calculation, 3* the hourly pay rate is often used.

Your figure of 2* the pay rate is closer to the actual cost for an employee without adding a burden rate (overhead costs/profit) on top of that.

Tom

Sorry the button got hit somehow in the prior post.

The other comments above seem to ring true.

The amount of general overhead costs is key, and that is where all the variables come in, from gov't req'd expenses, leases, insurance, benefits, management and amortized equipment etc.

Bo

I am only looking for costing so we can evaluate profit on past projects. We are not a job shop, but a builder of custom automated equipment. Our guys have to pay half of the insurance premium. Retirement is not provided, other than a 401K that the company contributes little to.

I am only looking for labor costs, not labor rate to quote to a customer. This is not for estimation, but for evaluation of profits from a project already accomplished.

You can't "estimate profits" without "estimating costs".

Tom

s:

I'm getting the feeling that the question comes from not having an explicit description in a contract of how things are to be "accounted for". Been there, done that, and I dislike legal disagreements as all the profits disappear into lawyers' condo payments.

FWIW, I recommend trying to get everyone to realize it is in the best interests of all concerned for the future benefit of the company to make reasonable and honest solutions to the prior outstanding issues, so everyone is motivated to move forward in the best possible way.

Bo

ews:

Any catch-all formula you employ will be pie-in-the-sky unless accounting has already been done throughout the project. This is fruitless excerise, especially if your company has depended more on actual cash flow than accounts receivable in the past. It would be better to set up accounts now and determine costs from this point on rather than looking to the past and throwing guesses at it. This is all just my humble opinion, of course. :)

Matt

For an engineering consulting office of similar size we've used the following numbers for years. These have been borne out by end of year reviews of actual costs.

Burdened labor (health care, industrial insurance, vacation, etc.) =

General office costs (rent, power, computers, etc.) = 1.3 x burdened labor cost

Resulting billing rate = direct labor cost x 2.4 x 1.3 = direct labor cost x 3.19

So a billing rate of 3+ times your pay rate doesn't seem out of line at all and believe me only results in modest profit to the office.

Best regards, Craig