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

Authors

  • Jan Emblemsvag Norwegian University of Science and Technology Norway
  • Gary Cokins Analytics-Based Performance Management LLC Cary, North Carolina United States

Keywords:

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

Abstract

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.

Author Biographies

  • Jan Emblemsvag, Norwegian University of Science and Technology Norway

    Jan Emblemsvåg is the General Manager of Midsund Bruk AS, a leading supplier of pressure vessels and a fully owned subsidiary by National Oilwell Varco. He is also Professor II at Norwegian University of Science and Technology, consultant and speaker. His experience includes management consulting, project-, risk- and operations management and senior management positions in various industries. He is an ambassador to Quality & Risk Norway. He has written several books and dozens of papers. He holds a PhD and M.Sc. at Georgia Institute of Technology and a M.Sc. at Norwegian University of Science and Technology

  • Gary Cokins, Analytics-Based Performance Management LLC Cary, North Carolina United States

    Gary Cokins is an internationally recognized expert, speaker, and author in enterprise and corporate performance management improvement methods and business analytics. He is the founder of Analytics-Based Performance Management, an advisory firm located in Cary, North Carolina at www.garycokins.com . Gary received a BS degree with honors in Industrial Engineering/Operations Research from Cornell University in 1971. He received his MBA with honors from Northwestern University’s Kellogg School of Management in 1974. Gary began his career as a strategic planner with FMC’s Link-Belt Division and then served as Financial Controller and Operations Manager. In 1981 Gary began his management consulting career first with Deloitte consulting, and then in 1988 with KPMG consulting. In 1992 Gary headed the National Cost Management Consulting Services for Electronic Data Systems (EDS) now part of HP. From 1997 until 2013 Gary was a Principal Consultant with SAS, a leading provider of business analytics software. His two most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics, and Predictive Business Analytics. His books are published by John Wiley & Sons.

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Published

2022-05-20

Issue

Vol. 7 No. 4 (2020): The Journal of Modern Project Management

Section

Articles-JMPM

License

Copyright (c) 2022 Jan Emblemsvag, Gary Cokins

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

How to Cite

Calculating hourly cost rates in project-based industries – part 2; cost management. (2022). The Journal of Modern Project Management, 7(4). https://journalmodernpm.com/manuscript/index.php/jmpm/article/view/JMPM02205

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