I'm doing an excercise for a client to work out the hourly rate he should be charging for his engineers, i have been comparing my calculations with the calcualtions done by the person who did this in previous years and have noticed a difference in how we both do it which has a large impact on the final figure.
When working out overhead per hour, i collated all the overheads , worked out productive hours and came up with an overhead per hour figure.
When calculating productive hours, i only used the staff who are actually charged out to customers i.e. engineers and not staff such as office staff etc.. The previous person used all staff including non-chargeable staff which dramatically reduces the overhead per hour.
The result of this is that the hourly charge out rate i calculated is much higher than the previous person calculated.
Can anybody clarify if i should be using all staff or just productive staff when calculating the overhead per hour. My reasoning is that i should only be using productive staff as it is these staff that earn the money to pay the overheads therefore their charge out rate should include the overheads rather than admin staff for example who do not earn money to pay the overheads.
