Workforce, Labor Standards & Skills Planning worked example

Indirect Labor Ratio at 110% allocation coverage of the base: a worked example

This scenario runs the indirect labor ratio calculation on the strong side: 110% allocation coverage of the base, with every other input held at its documented default. A plant controller uses it to load the right amount of indirect labor onto direct hours for absorption.

The inputs for this scenario

  • Direct labor hours in the base: 500 hrs (unchanged)
  • Indirect rate per direct hour: 9.5 $/hr (unchanged)
  • Allocation coverage of the base: 110 % (raised for this scenario; the documented default is 100)
  • Fixed supervision / salaried cost: 1,200 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Indirect labor cost = direct hours x indirect rate x allocation coverage + fixed supervision) to the inputs above produces each figure below.
  • At this operating point the engine returns 6,425 $ for total indirect labor ratio cost, the number this scenario is built around.
  • At this operating point the engine returns 12.85 $ / piece for indirect labor ratio cost per unit.
  • At this operating point the engine returns 5,225 $ for variable indirect labor ratio cost.
  • At this operating point the engine returns 1,200 $ for fixed indirect labor ratio adder.

How this compares with the baseline

  • Against the tool's baseline example, where allocation coverage of the base sits at 100% and the headline result is 5,950 $, this scenario comes in 7.98% above the baseline at 6,425 $.
  • Use it when setting or auditing an indirect labor absorption rate, or benchmarking how much support cost each direct hour is carrying. Treat this as a target state: the delta against the baseline quantifies what the improvement is worth before you commit to chasing it.

Results at a glance

  • Total indirect labor ratio cost: 6,425 $ (headline result)
  • Indirect labor ratio cost per unit: 12.85 $ / piece
  • Variable indirect labor ratio cost: 5,225 $
  • Fixed indirect labor ratio adder: 1,200 $

Run it with your numbers

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

Last reviewed 2026-05-12.