If overhead is excluded, a job may cover direct labor and materials while still failing to support the company. One practical method is to calculate total monthly overhead, subtract any amount recovered elsewhere, and divide the remainder by realistic monthly billable crew hours.
If recoverable overhead is $12,000 per month and the company expects 600 billable crew hours, the overhead recovery rate is $20 per billable crew hour.
Use realistic capacity
Weather, travel, maintenance, meetings, training, and schedule gaps reduce billable capacity. Dividing overhead by an unrealistically high number of hours understates the amount each job needs to recover.
Review the calculation as the season, crew count, costs, and operating model change. Ask an accountant how expenses should be classified; use the operating calculation to make pricing decisions.