Charge Out Rate Calculator

Formula

The formula to calculate Charge Out Rate (CR) is:

\[ CR = (L + O) \times (1 + PM) \]

Where:

$ CR $ is the Charge Out Rate per hour ($)
$ L $ is the Cost of Labor per hour ($)
$ O $ is the Overhead Cost per hour ($)
$ PM $ is the Profit Margin (decimal)

What is a Charge Out Rate?

A charge out rate is the cost rate that a business or professional charges for their services per hour. It is calculated by adding the cost of labor and overheads, then adding a profit margin. This rate is often used by professionals such as lawyers, consultants, or freelancers to bill their clients. It helps to cover not only the direct costs of providing the service but also the indirect costs associated with running a business.

Example Calculation

Let's consider an example:

Cost of Labor per Hour (L): $50
Overhead Cost per Hour (O): $20
Profit Margin (PM): 0.25 (or 25%)

Using the formula to calculate the Charge Out Rate (CR):

\[ CR = (50 + 20) \times (1 + 0.25) = 70 \times 1.25 = 87.50 \, \text{\$/hour} \]

This means that the charge out rate should be $87.50 per hour to cover labor, overhead, and desired profit.