It’s always important to factor in labor costs when evaluating the relationship between cost price and selling price.
To begin with, labor cost is typically calculated by multiplying an employee’s hourly wage by the number of hours worked.
When estimating the cost to service a unit, especially before quoting a customer, it's essential to include labor costs to ensure profitability.
Smart 145 offers three methods for calculating labor costs within Work Orders. These settings are typically configured by our Engineering Team. Read on to learn more about each option and determine which one best suits your company’s needs.
To configure or define a fixed ratio between labor cost and labor price You can opt for a percentage-based calculation. In this case, the labor cost will be computed as a percentage of the labor price, and you'll need to set a default percentage value accordingly.
Once the hours and hourly rate are entered in the appropriate fields, the labor cost will be calculated automatically.
Notice the hourly rate will be pulled from the Customer profile
In the following example, the labor cost is set to default to half of the labor price. Another way to see it is that the cost will be 50% of the price calculated.
2- If you prefer to show the actual labor cost instead of a ratio, i.e., the real worked hours by the employee's hourly wage, the system will keep a record of and tally up the number of hours every time an employee clocks in and out of the Work Order you are quoting.
The employee's hourly wage will be set up in the employee's record.
The number of hours will be then multiplied by the employee's hourly wage, and that is what will populate in the labor cost box.
For the third method, the labor cost is calculated by multiplying the default hourly rate by the task hours.
