What is overhead recovery rate
Step 6. Calculating the Overhead Recovery Rate. To calculate the overhead recovery rate (or break even hourly rate) we need the total costs for the business per year and the total amount of available (billable) time for the year for everyone added together. A frequently found way of doing it. Overhead recovery is incorrectly based on an input. The lower parts and labor cost, the worse overhead recovery becomes and the higher the overhead recovery rate must be set. Base overhead cost recovery on equipment revenue as an output measure for the value of work done by the machine. Seldom done. An hourly rate is similar to T & M, with the burden of overhead and profit attached to the labor rate. This is done by assuming the worker will work a given number of hours per year. That number is then divided into the total company overhead and profit to arrive at the rate per hour that is needed.