Contract Manufacturing, Job Shop Quoting & Make-to-Order worked example

Labor Hour Rate at 99% direct labor utilization factor: a worked example

What does the result look like when direct labor utilization factor reaches 99%? The full calculation is worked below with real intermediate numbers. pricing hands-on fabrication, assembly, inspection, programming, or setup labor in quotes

The inputs for this scenario

  • Recoverable direct-labor cost pool (annual): 73,500 $ (unchanged)
  • Billable direct labor hours (annual): 1,040 labor hr (unchanged)
  • Direct labor utilization factor: 99 % (raised for this scenario; the documented default is 86)

Working through the calculation

  • Applying the documented formula (base labor-hour rate = recoverable labor cost pool รท billable direct labor hours) to the inputs above produces each figure below.
  • At this operating point the engine returns 69.97 $ / labor hr for effective labor-hour rate after utilization, the number this scenario is built around.
  • At this operating point the engine returns 70.67 $ / labor hr for raw throughput.
  • At this operating point the engine returns 99 % for direct labor utilization factor.
  • At this operating point the engine returns 1,040 hr for billable direct labor hours.

How this compares with the baseline

  • Against the tool's baseline example, where direct labor utilization factor sits at 86% and the headline result is 60.78 $ / labor hr, this scenario comes in 15.12% above the baseline at 69.97 $ / labor hr.
  • A figure at this level is achievable when direct labor utilization factor is genuinely sustained, not just peaked for a shift. It uses one blended pool and one utilization factor, so a shop mixing low-skill assembly with high-skill toolmakers should run separate rates rather than averaging very different wage and burden levels into one number.

Results at a glance

  • effective labor-hour rate after utilization: 69.97 $ / labor hr (headline result)
  • Raw throughput: 70.67 $ / labor hr
  • direct labor utilization factor: 99 %
  • billable direct labor hours: 1,040 hr

Run it with your numbers

  • Every input above is editable in the live Labor Hour Rate calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.