Shop rate / burden rate

Direct labor is what you pay the machinist per hour. Burden, or overhead, is everything else that keeps the spindle turning: rent, utilities, machine payments and depreciation, tooling, insurance, software, office staff, and payroll taxes and benefits. The burdened shop rate spreads those costs over the hours you actually expect to sell, and the rate you quote adds profit on top.

The common mistake is spreading overhead over all paid hours instead of billable hours. A shop that bills 60 percent of available hours needs a much higher rate than one that bills 85 percent. Many shops also set different rates per work center, since a five-axis machine costs more per hour to own than a manual saw.

Traveler is being built to let you set rates per work center during setup, so routed quotes price each op at the right machine rate. The job P&L then shows whether the actual hours matched the estimate.