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Service Cost Estimator

The Service Cost Estimator calculates the expected cost of delivering a service engagement. It combines internal labor, subcontractor charges, materials or pass-through items, and an overhead allocation so you can estimate the full delivery cost rather than looking only at direct labor.

It is designed for service firms that need a consistent costing basis for quotes, job reviews, and margin analysis. The estimate can reveal when a seemingly profitable fee does not cover project management, tools, facilities, insurance, or administrative support. Because overhead allocation methods vary by company, the percentage should reflect your own internal costing policy.

Service assumptions

hours
USD
USD
USD
%
Result
—
Estimated total service cost
Internal labor cost—
Direct delivery cost—
Allocated overhead—

1. Estimate internal hours
Include all staff time needed to deliver and manage the service, not only customer-facing hours.

2. Use a loaded labor rate
Enter wage plus payroll taxes, benefits, and other labor costs included in your costing method.

3. Add external delivery costs
Include subcontractors and materials that are specifically required for the engagement.

4. Apply overhead
Enter the percentage used to allocate shared operating costs to direct service delivery.

5. Compare cost with price
Use the total cost as the denominator for markup or as the cost base for a target-margin price.

Labor cost = Labor hours × Loaded labor cost per hour
Direct cost = Labor cost + Subcontractor cost + Materials cost
Total service cost = Direct cost × (1 + Overhead rate ÷ 100)

Overhead is applied to all direct delivery costs in this model. A business that allocates overhead only to labor should adjust the percentage or use its internal job-costing method.

What the result means

The result estimates the full cost assigned to one service engagement under the selected overhead rate.

Sales commissions, financing costs, income taxes, and contingency allowances are excluded unless entered within another cost field.

Given: 18 labor hours at $55 per hour, $600 in subcontractor cost, $180 in materials, and a 20% overhead allocation.

Calculation: Labor cost = 18 × $55 = $990. Direct cost = $990 + $600 + $180 = $1,770. Overhead = $1,770 × 20% = $354.

Result: Total estimated service cost = $1,770 + $354 = $2,124.

A quote below $2,124 would not recover the modeled cost before any desired profit.

What is a loaded labor rate?

It is the hourly cost of employing the worker, not just the hourly wage. It may include payroll taxes, benefits, paid leave, and other employer costs.

Should reimbursable expenses be included?

Include them when you want the full delivery cost. If the customer reimburses them separately, keep that revenue and expense treatment consistent.

How do I choose the overhead rate?

Use a rate derived from your own shared operating costs and allocation base. A generic industry percentage may distort the economics of your service.

What happens when a field is left blank?

Blank optional cost fields are treated as zero, allowing you to model work without subcontractors or materials.

Is this the same as cash paid during the month?

No. It estimates economic delivery cost for an engagement, while cash flow depends on when payroll, vendors, and customers actually pay.