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

Shop Rate Calculator

Set next year's shop rate from what the shop costs to run and the hours you actually bill, then check the rate on your quoting sheet. You need annual cost, available hours, utilization and a target margin.

What this calculator does

  • The hourly rate your billed hours must carry to recover shop cost and your target margin, checked against the rate you quote.

Formula used

  • Billable hours = available direct hours × billable utilization
  • Break-even shop rate = annual shop cost ÷ billable hours
  • Shop rate at target margin = break-even rate ÷ (1 − target margin)
  • Margin at quoted rate = (quoted − break-even) ÷ quoted; annual profit = (quoted − break-even) × billable hours
  • Break-even utilization = annual shop cost ÷ (quoted rate × available direct hours)

Inputs explained

  • Annual Shop Cost: Direct labor plus overhead from your P&L, less material and outside processing.
  • Available Direct Hours per Year: Direct workers × hours each is at work per year, from payroll.
  • Billable Utilization: Hours charged to jobs ÷ available hours, from job tickets.
  • Target Profit Margin: Profit you want as a share of the price you quote.
  • Shop Rate in Your Quotes: The hourly rate on your current quoting sheet.

How to use the result

  • Best suited to setting next year's shop rate, repricing after losing a large customer, checking whether a quoted rate earns your margin.
  • One blended rate overprices simple work and underprices costly machines; use machine hour rates where work centers differ. If you bill machine hours instead of labor hours, count machine hours in available hours and utilization.

Current U.S. benchmarks

  • As of Aug 2026, U.S. manufacturing runs at 75.7% of capacity (Federal Reserve via FRED), down 0.1 points from a year earlier. Enter your own plant's utilization; the national figure is a reference point for how loaded the industry is.
  • 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

  • Should material go into the shop rate? No. Quote material and outside processing as separate lines with their own markup. Inside the rate, they would charge every hour for material that only some jobs use.
  • Why does my shop rate go up when we are less busy? Because rent, salaries and depreciation stay put while billed hours fall. At $1.65 million of cost and 18,800 available hours, 75% utilization breaks even at $117.02 an hour and 60% needs $146.28.
  • Is a 12% target margin the same as a 12% markup? No. Margin is profit as a share of price; markup is profit as a share of cost. A 12% margin needs a 13.6% markup, so the rate is break-even ÷ 0.88, not break-even × 1.12.
  • Do setup hours count as billable? Yes, if your quotes charge setup: those hours are charged to jobs. If you absorb setups, leave them out of billed hours; utilization falls and the rate rises to recover them.

Related guides

Last reviewed 2026-10-01.