Hourly labor cost, how to do the math


Hourly labor cost

Hourly labor cost is not your employee's hourly wage or your
employee's hourly wage cost. You have to take into account your
fixed costs. Here's how to do the math.

The formula:
(((( A ) / 12 * ) / 160 ** ) / B ) + C )

Explanation:

A : FIXED ANNUAL FEES:
  • Rent for 12 months
  • Taxes
  • Phone
  • Administration fees
  • Salary of advisor or other staff
  • Etc

* 12 : 12 month in a year
** 160 : 160 hours (4 weeks of 40 hours)
B : The number of mechanics who work in the garage and who are billable.
C : Hourly wages including marginal costs and benefits.

Example:
  • $100 000 annual fixed fee
  • 4 mechanics
  • $40 per hour
(((( 100000 ) / 12 ) / 160 ) / 4 ) + ( 40 ) = $ 53 / HOUR