The Billing Rate does a lot of work
Hourly Rate or Billing Rate
Overhead (Indirect Labor and Other Expenses) (1.50)
Profit
Direct Labor (1.00)
Particular role in a firm has a salary of $104,000 per year Firm’s overhead rate is 150% ... The firm’s target profit is 17% which means that Billing Rate – Costs = Profit = 17% Labor cost per hour = $104,000 / 2080 hours per year = $50.00 per hour Overhead is $50.00 x 150% or $75.00 per hour $125 + Profit = Billing Rate $125 + 17% Billing Rate = Billing Rate $125 = 0.83 Billing Rate Billing rate = $125 / 0.83 = $150.00 (a 3.0 multiple on the person’s cost, not coincidentally)
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