Why is the hours variance valued at the estimated shop rate?

So it measures time alone. The extra hours at the estimated rate show what the slower job cost. The rate variance prices the rate difference on every actual hour, and the two sum to the labor and burden overrun.

What causes a rate variance in a job shop?

Usually who ran the job and when. A higher-paid operator, overtime premium or a move to a more expensive machine raises the actual cost per hour even when the hours match the estimate.

Should rework and remakes go into actual hours and material?

Yes, if they were booked to this job. Rework hours and replacement material are real job cost. Leaving them out flatters the estimate and repeats the miss on the next quote.

Is a job that beats its estimate always good news?

No. A job that comes in well under its estimate may have been quoted too high, which can cost you the next bid. Check a few runs of the same part before you lower the estimate.

Contract Manufacturing, Job Shop Quoting & Make-to-Order calculator

Job Costing Variance Calculator

Find how far a closed job ran over or under its estimate, and whether hours, shop rate or material caused it. You need estimated and actual hours, rates and material cost from the job cost report.

What this calculator does

Split a closed job's cost overrun into hours, rate and material variances so you know which part of the estimate to fix.

Formula used

Hours variance = (actual hours − estimated hours) × estimated shop rate
Rate variance = (actual shop rate − estimated shop rate) × actual hours
Material variance = actual material cost − estimated material cost
Total variance = hours + rate + material variance = actual job cost − estimated job cost
Variance share = total variance ÷ (estimated hours × estimated shop rate + estimated material cost) × 100

Inputs explained

Estimated Hours: Setup plus run hours in the estimate behind the quote.
Actual Hours: Setup plus run hours booked to the job.
Estimated Shop Rate: Burdened hourly rate the estimate used.
Actual Shop Rate: Labor and burden cost booked to the job ÷ actual hours.
Estimated Material Cost: Material and purchased items in the estimate.
Actual Material Cost: Material and purchased items booked to the job.

How to use the result

Best suited to closing a job before quoting the repeat order, monthly review of jobs that ran over.
Material is one variance; split price from usage with purchase order quantities and prices. Setup and run hours are combined; compare them on the router to see which slipped.

Current U.S. benchmarks

The U.S. prime lending rate is 7.00% (Federal Reserve via FRED, 2026-10-02). Payback and financing math should start from today's rate, not a remembered one.

Common questions

Why is the hours variance valued at the estimated shop rate? So it measures time alone. The extra hours at the estimated rate show what the slower job cost. The rate variance prices the rate difference on every actual hour, and the two sum to the labor and burden overrun.
What causes a rate variance in a job shop? Usually who ran the job and when. A higher-paid operator, overtime premium or a move to a more expensive machine raises the actual cost per hour even when the hours match the estimate.
Should rework and remakes go into actual hours and material? Yes, if they were booked to this job. Rework hours and replacement material are real job cost. Leaving them out flatters the estimate and repeats the miss on the next quote.
Is a job that beats its estimate always good news? No. A job that comes in well under its estimate may have been quoted too high, which can cost you the next bid. Check a few runs of the same part before you lower the estimate.

Related guides

Job Shop Quoting Accuracy: How to Stop Losing Margin on Every Win

Last reviewed 2026-10-01.