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

Margin Leakage Calculator

Margin Leakage measures the gap between the gross margin a job was quoted to earn and the margin it actually delivered, expressed as a percentage of quoted revenue. It is the single most useful post-mortem metric in a job shop because it isolates how much profit eroded between estimating and execution. Estimators, plant controllers, and operations managers use it on completed or in-flight jobs to flag pricing errors, scope creep, scrap, and overtime that quietly drain earnings. Tracked across jobs it tells you whether your estimating standards are systematically optimistic or whether specific customers and part families bleed margin.

What this calculator does

  • Estimate margin dollars lost between quoted and actual job performance.
  • reviewing jobs that shipped below quoted profitability
  • It computes margin leakage dollars (quoted minus actual margin) and a leakage rate as a percentage of the quoted revenue basis.

Formula used

  • margin leakage dollars = quoted gross margin dollars - actual or forecast gross margin dollars
  • margin leakage rate = margin leakage dollars ÷ quoted revenue leakage basis × 100

Inputs explained

  • Quoted gross margin dollars:
  • Actual or forecast gross margin dollars:
  • Quoted revenue leakage basis:

How to use the result

  • Use it at job close-out or mid-job to quantify how far realized margin has drifted from the quote, and to compare leakage across jobs, customers, or part families.
  • Garbage-in applies: if the actual margin figure excludes overtime burden, rework, or unrecovered setup, the leakage rate will understate the true bleed.

Current U.S. benchmarks

  • The U.S. prime lending rate is 6.75% (Federal Reserve via FRED, 2026-07-02). Payback and financing math should start from today's rate, not a remembered one.

Common questions

  • How do you calculate margin leakage? Subtract actual gross margin from quoted gross margin, then divide by quoted revenue and multiply by 100. With $12,900 quoted, $9,400 actual, and a $48,500 basis, leakage is $3,500, or 7.22% of revenue.
  • What is a good margin leakage rate? Below roughly 2-3% of revenue is tight estimating-to-execution control. The example's 7.22% is high and warrants a root-cause review of where $3,500 was lost.
  • What is the difference between margin leakage dollars and rate? Dollars ($3,500 here) is the absolute profit lost; rate (7.22%) normalizes it against quoted revenue so you can compare a small job to a large one fairly.
  • Why use quoted revenue as the basis instead of cost? Revenue is the figure the customer pays and the denominator most shops report margin against, so a revenue-based leakage rate is directly comparable to your quoted margin percentage and easy to communicate.
  • What causes margin to leak between quote and delivery? Common culprits are unquoted scope, scrap and rework, setup or cycle times running over standard, expedite freight, and overtime. Margin leakage quantifies the total; a job cost report attributes it.

Last reviewed 2026-05-12.