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Calculating a burdened shop rate and profit

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To calculate your hourly burdened shop rate, divide average monthly shop and administrative costs by the number of productive hours. For example, if monthly overhead is $12,000 with 300 chargeable hours, then the burdened rate is $40 per hour. By estimating the number of hours required to produce the graphics, and multiplying by the hourly burdened rate, we arrive at the job’s burdened labor cost (Table 1). When developing cost analyses, be sure to place estimate and actual figures side-by-side. To calculate burdened material costs, add all raw materials that will be charged to the job, including drop-offs and material required for proofs. Drop-offs, also known as overage, include any material that is purchased for a particular job, but not used. For example, if you buy a 4 x 8-ft. sheet of sign substrate for a 4 x 6-ft. sign, the unused 2 x 4-ft. drop-off is still charged to the job, even though you may save it for future use. When using past drop-offs on future jobs, the material cost should be added, even though you’ve paid for the product. If you don’t factor in this cost, your estimates won’t be consistent when the same sign is reordered in the future.

 

Table 1: Total Burdened Labor Costs
Burdened Labor Costs Actual
Design art (This is a shop/administrative cost if you aren’t charging for design art.) 1 hour
Substrate preparation 1/2 hour
Computer cutting/digital printing 2 hours
Weeding 1/2 hour
Vinyl application 2 hours
Packaging/delivery 1/2 hour
Miscellaneous  
Total production time 6.5 hours
Burdened labor cost
(Multiply production time by the burdened rate [6.5 x $65])
$422.50

To account for normal production losses, raw materials should be multiplied by a waste factor of 10% or more. The waste factor for digital printing, for example, can range as high as 30% to 40%. If you screenprint, you must assess the job’s difficulty. Printing a job with a halftone, for instance, can be very difficult, causing high material loss. I also recommend burdening the material an additional 10% to cover your costs for carrying the job, and to account for delinquencies. To achieve a true 10%, divide by 0.9. Any other direct costs should also be burdened at the same rate (Table 2).

 

Table 2: Calculating Burdened Material Costs
Remember to:  
1) Include all material charged to the job, including drop-offs (material).  
2) Multiply total material by waste factor.  
3) Burden the material costs by 10% (divide cost by 0.9).  
Burdened Material Costs  
12 2 x 3-ft. sign blanks @ $8.71 ea. $104.52
24 sq. ft. of vinyl at $.85/sq.ft. $20.40
24 sq. ft. of application tape at $.10/sq.ft. $2.40
Subtotal
Waste factor (Multiply $127.32 x 1.1 or other multiplier that accurately
reflects your typical material loss.)
$127.32
Total burdened material cost
(Add subtotal plus waste factor.)
$140.05
(Burden materials by at least 10%; divide by 0.9 to do this) $155.61
Burdened labor costs (Table 1) $422.50
Burdened material costs $140.05
Total costs $562.55
Selling price @ 40% markup ($562.55

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