Home › Forums › General Forums › Implementation › Need Help on Labor Costs for Incidents

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Esme TraubeI need help in figuring out cost per hour.

rate for my opex is $66

Group has 2664 incidents a year, time $66 an hour, they took days to close a task. Days = 264 in hours

they can prob do 10 incidents an hour

I was thinking of this formula, but not sure if that is right.

2664/10*66*264 = $4,641,753 COSTnot sure if my ‘they can do 10 incidents an hour’ is right to decrease the number of incidents

You have conflicting information in your calculations which is why you this is difficult.

Are you looking to get actual work time costs?

or

days to close costs/cycle time?

In the first type you say you can do 10 incidents an hour with an annual volume of 2664 units. This translates into 265 hours x $66 or $17,500 (With rounding) The per incident time to close (264 hours) seems to have non-work time included so left it out.

In the second example the math above gives you close to an answer…incidents 2664 x hours per incident 264 x cost per hour $66 = $46,417,536. As above this doesn’t seem to pass the ‘laugh out loud’ test as there is probably no way you spend $46M in people time on this.

So back to your goal – Are you looking to calculate actual cost to process, or mixing in some cycle time information (264 days to close). They are apples and oranges measurements with different problems and solutions inherent in the work.

Esme TraubeThank you so much! I have tio show it using the dollar amount, so trying to see how that would be. Yeah I think the 46Mil is a bit much which is why I thought that the team can do more than one incident at one time.

Esme TraubeI also need to show for the entire year. So I got 17,000 an incident – btw that is just to assign not to close. :S so it takes awhile to assign to the right person.

You’re making a false assumption that time to close a task = hours worked when in fact most of this time is non-value-added wait time when nothing is happening. So your formula gets a $ value that is far above actual. If your organization used activity based accounting you’d have actual hours spent per task and you wouldn’t have to do this calculation. As it stands, you’re dealing with missing data and you probably can’t do better than simple math. Total hours worked by this group divided by number of incidents times hourly rate. When you give this number to management be prepared to explain why it’s the best you can do with available data. And don’t try to get fancy with formulas like you proposed in this question or you’ll get torn apart by the sharks.

@Straydog is spot on….If you are using this to justify people, salary, org structures, etc. you need more data or your leaders will not believe your figures.

I go back to my earlier statement…What is your end goal?

if it is to show cost per incident then you have to throw out the 264 hours to close number because of all the non value work inherent in just waiting. You will have to quantify either the per incident work hours in some manner, perhaps just a quick manual sample, or if you have a team only dedicated to this task look at the total cost of that team’s salary divided by the 2664 annual incidents.

In this case I would highly suggest a more solid data gathering process before presenting to any level of leadership.

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