Labor Overhead and Machine Burden Rate Calculator for Infor VISUAL
Burden rates drive standard cost, quotes and inventory value, so a wrong rate spreads through the whole part master. This tool derives rates from your overhead pools and shows how the choice of basis changes a job's cost.
Your numbers
Rent, supervision, depreciation, utilities, indirect salaries.
Consumables, power, tooling, indirect supplies.
Your results
Rates depend on your cost pools and allocation policy. Confirm with your controller before changing standards or quoting.
Overhead rate per direct labor hour vs monthly hours
Sweeps Direct labor hours per month from 3000 to 9000, holding your other inputs fixed.
Costing review from your ERP data
Optional: we can compare applied and actual overhead by period using your own data.
Optional. The tool and every export work without this. No spam.
How to use it
Enter a month of fixed and variable overhead, direct labor hours and machine hours, and the average direct wage. Add the labor and machine hours for one job to compare cost on each basis. The result shows overhead per labor hour, burden as a percent of wage, overhead per machine hour and the resulting job conversion cost. Use a budgeted normal volume rather than a single unusual month.
- Use normal capacity hours, not a slow month
- Keep separate pools for different departments when costs differ
- Review rates at least annually
- Do not include material in the pools
The formula behind it
A predetermined overhead rate is budgeted overhead divided by the budgeted activity base. With direct labor hours the base is labor time, with machine hours it is run time. Burden percent is the overhead rate divided by the wage rate. Labor basis cost multiplies job labor hours by wage plus overhead. Machine basis cost adds labor wages to machine hours times the machine rate, which better reflects automated work.
Reading the result
If the two job costs differ widely, the basis matters. Machine-heavy jobs look cheap on a labor basis and carry too little overhead, while labor-heavy jobs look expensive. The chart shows that the rate falls as volume rises, since fixed overhead is spread over more hours. Quoting at a rate computed for a busy month in a slow period under-recovers cost, so test the sensitivity before setting prices.
Common mistakes
Frequent errors include burying depreciation of automated equipment in a labor-hour pool, mixing indirect labor hours into the base, and changing rates without revaluing inventory. Some shops use one plantwide rate for very different departments, which distorts cost. Also be careful to keep fixed and variable pools separate if you want to analyze volume effects or decide on make-or-buy and incremental work.
Frequently Asked Questions
Which base is better, labor hours or machine hours?
Use the base that best drives overhead. Where machines do most of the work, machine hours tracks cost better. In manual assembly, labor hours usually fits. Many shops use both by department.
How often should I recalculate rates?
At least yearly with the budget, and again after major changes in headcount, equipment or volume. Large drifts between applied and actual overhead are a signal to revisit the rate.
Should fixed overhead be in the rate?
For full absorption costing, yes. For short-term pricing decisions you may look at variable cost only. Keeping both pools visible lets you do either.
What is a typical burden percentage?
It varies widely by industry and automation. Labor-intensive shops often see 100% to 300% of wage, capital-intensive ones can be higher. Compare to your own history, not a general number.
If you want burden and variance analysis built from your ledger and routing data, we can set that up on a read-only basis.
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