Chargeback: Critical to Your Survival
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Begin by reviewing your expenses for the last 12 months and calculate the monthly average for each account. Divide the accounts into one of the three categories (Labor, Material or Overhead) and find the sum of each category for the average month.
Labor: The total labor cost is the sum total of all labor, benefit and temporary labor accounts. You should be looking at an average monthly total. Now determine how many hours were available to work. There are a total of 2,080 hours available per year; if you have 15 employees, you have paid your employees for a total of 31,200 hours annually or 2,600 hours per month. Divide the average monthly labor expenditures by 2,600 to get the average hourly labor rate.
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