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Calculating hourly cost rates in project-based industries – part 2; cost management

Jan Emblemsvag, Gary Cokins


Hourly cost rates are crucial project costing due to the substantial proportion of labor cost in projects. Yet, there is little published about calculating hourly cost rates, and it is a contentious topic in corporations. Therefore, an approach is provided in this paper that will improve the calculation of hourly cost rates. It is based on a novel approach to Activity-Based Costing (ABC) and a revised version of the CAM-I Capacity Model which is adopted to project-based industries. Both an example and a case are provided to allow detailed discussions.


Capacity management; Earned Value; Activity-Based Costing; subcontracting; shipbuilding; construction; fabrication


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