How to calculate unit cost in Magnifi

Unit Cost

The Unit Cost represents the operating cost per hour per employee, for every hour that is charged. You can then compare the cost per hour with their Sell Rate (ie charge rate per hour) to identify their Margin. 

If you have Actuals showing in the Profit and Loss Projection, the calculation will be based on the Projections for the year inclusive of the Actual Results to Date. If you only want to calculate the Cost per Hour based on the budgets only,  then you can remove the "Show Actuals to" month that is showing under "Projections - Profit and Loss". 

The total cost per Hour includes;
  1. Labour Cost (inclusive of Overtime)
  2. Overhead Cost

How is Labour Cost per Hour calculated?

This represents the Labour Cost per hour for every hour charged. The calculation includes;

Base Labour
  1. Calculate the total Labour Cost per hour which includes Overtime and the On-Costs (superannuation, payroll tax etc) 
  2. Divide #1 by the Available Hours % to determine the cost inclusive of leave entitlements.
  3. Divide #2 by the Productivity % to determine the cost per productive hour.
  4. Divide #3 by the Recovery % to determine the cost per hour charged. 
Overtime 

      1. Calculate the Overtime cost per hour which represents the normal time rate x multiplier which is entered under Labour Drivers and the addition of the on-costs. Superannuation is optional and the settings are applied under Payroll Rates.
      2. Skip step 2 above and move to Step 3 & Step 4.

If you hover over the Labour Cost $ value it will reveal the calculation for each employee.

How is the Overhead Cost per Hour calculated?

If you click on the "Overhead Cost" hyperlink, it will reveal the calculation. The Rate per hour is calculated based on;
  • Total Overhead Costs
  • Less: Income that has not been flagged as "Capacity Building". 
  • The Total represents the Net Overheads (Overheads less Other Income) which is effectively the balance that needs to be funded from Labour.
  • Divide by Total projected billable hours. The breakdown per employee appears under Capacity Summary in the Billable Hours column.
  • Equals Cost per Hour per employee. The Overhead Rate per Hour is applied consistently to all employees.



If you have contractors who have been setup under Employees, you can also include their hours in the Total Hours calculation by selecting this option under Capacity - Capacity Rates.