Overhead Recovery Rate
Annual overhead spread over billable hours ($/hr) or over annual direct cost (% markup). $200K over 8,000 hours -> $25/hr; over $500K direct -> a 40% markup. Cutting overhead lowers the rate directly, widening the margin. The contractor books and billable volume govern.
Formula and source
per-hour: rate = annual_overhead / billable_hours; markup: overhead% = annual_overhead / annual_direct x 100; job_overhead = job_direct x overhead%/100.
The standard contractor overhead-recovery (indirect cost allocation) method, by name.
Audience
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