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Calculation of Labor Cost
This worksheet helps us answer the deceptively easy question: what is the hourly cost of each employee on each production center? We know it's more than the rate of his or her job classification: there are fringe benefits like holidays and vacations, as well as various forms of insurance, worker's compensation and the like. To understand the problem better, it may help to ask yet another question.
Where is our one and only opportunity to recoup the cost of labor?
When we quote a job, more often than not we use an Estimate to arrive at a selling price. But the Estimator is handcuffed. S/he can only calculate the cost for each production center to makeready and run the job at standard hours and speeds. S/he cannot know if the job will take longer, or that for some of the time, an employee may be waiting for an electrical repair, for materials, or for a job approval.
The Calculation of Labor Cost (CLC) by job classification separates these "excess" hours from the hours when the person is making-ready or running cartons at 100% of standard. When the excess costs are added to the standard costs and the total is divided by standard hours, the individual's hourly rate rises to reflect all the costs the company incurs for the employee.
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Job Classification: |
Sheeter Operator |
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A. Hourly Rate |
$11.00 |
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B. Shift Differential |
0.00 |
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C. Annual Increase |
3.0% |
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D. Gross Rate (A x (1 + C)) + B |
$11.33 |
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E. Downtime Percentage |
5.0% |
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F. Inefficiency Percentage |
1.0% |
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Hours |
Dollars |
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OOP |
EXCESS |
| G. Regular Clock Hours (40 hrs x 52 weeks) |
2,080.0 |
23,566 |
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| H. Projected Annual Overtime Hours |
208.0 |
3,535 |
1,178 |
| I. Gross Paid (G + H) |
2,288.0 |
27,101 |
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| J. Vacation Hours (40 x 2) |
80.0 |
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906 |
| K. Holiday Hours (9 x 8) |
72.0 |
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816 |
| L. Punched-In (I - J - K) |
2,136.0 |
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| M. Downtime: (E x L) |
106.8 |
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1,210 |
| N. Chargeable (L - M) |
2,029.2 |
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| O. Inefficiency: (F x N) |
20.3 |
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230 |
| P. Budgeted (N - O) |
2,008.9 |
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| Q. Break Hours (L ÷ 8 x .5) |
133.5 |
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1,513 |
| R. Net Chargeable (P - Q) |
1,875.4 |
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$5,853 |
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Dollars |
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OOP |
EXCESS |
| Payroll Tax/FICA |
(.0765 up to $53,400)+(.0145 over $53,400) |
2,073 |
2,073 |
| Other Taxes |
SUTA: $84, FUTA: $56 |
140 |
140 |
| Worker's Comp. |
0.0600 times Gross Pay |
1,626 |
1,626 |
| Group Insurance |
Average |
2,500 |
2,500 |
| Life Insurance |
Average |
125 |
125 |
| Pension |
0.0200 times Gross Pay |
542 |
542 |
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$7,006 |
$7,006 |
| TOTAL OOP & EXCESS COSTS |
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$34,108 |
$12,859 |
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| per Budgeted Hour |
2,008.9 Total Hours |
$16.98 |
$6.40 |
| per Net Chargeable Hour |
1,875.4 Total Hours |
$18.19 |
$6.86 |
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100% |
38% |
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