Finance and Bookkeeping - Session 08

Delivery Cost and Capacity

Build a supported delivery cost pool and calculate the cost of available service hours. Explain the difference between paid time, usable delivery capacity, and client work before drawing a hiring or pricing conclusion.

The MSP finance task

September records $70,774.66 of payroll as cost of goods sold and $8,455.17 of benefits in overhead. These totals do not identify delivery roles or available hours. A cost model needs payroll mapping and time records.

The delivery cost pool

A cost pool groups supported costs for analysis. The company's aggregate payroll does not identify delivery roles or justify an equal per-employee allocation.

Loaded labor evidence

Define compensation and employer costs. Reconcile payroll and benefits. Employee withholding has a different role from employer expense. The payroll tax label needs register detail.

Delivery capacity

Paid time includes nondelivery responsibilities. Practical capacity removes identified nondelivery time. Actual client hours measure recorded work. State the denominator used for utilization.

The two hourly rates

Practice pool: $12,000. Practical capacity: 200 hours, giving $60/hour. Actual client work: 150 hours, giving $80/hour.

The allocation reconciliation

Capacity method: $9,000 assigned to 150 client hours and $3,000 unused capacity. Actual-hours method assigns the full $12,000. Mixing methods can duplicate cost.

The September accounting pool

Vendor COGS $36,061.76 + payroll COGS $70,774.66 = COGS $106,836.42. Benefits $8,455.17 remain in overhead under the supplied classification.

The practice client result

Client A: $3,000 revenue - 30 hours × $60 - $500 software = $700 contribution before overhead and unused capacity.

The company worksheet

Support roles, employer costs, and hours. State the rate denominator. Reconcile analysis to the ledger. The CEO reviews capacity assumptions and staffing decisions.

Your company has seven employees, but the reports contain no role mapping. What supports a delivery labor pool?

  1. An equal share of all payroll for each person
  2. Roles, payroll composition, and approved allocation
  3. A generic technician salary found online
  4. The reported payroll total divided by client count

A hypothetical $12,000 pool has 200 practical delivery hours. What is the capacity-based rate?

  1. $80/hour
  2. $150/hour
  3. $60/hour
  4. $200/hour

Actual client hours are 150 and practical capacity is 200. What utilization follows from that definition?

  1. 75%
  2. 50%
  3. 100%
  4. 133.33%

Key terms

Cost pool
A defined group of costs used in an analysis.
Loaded labor cost
Compensation plus the employer-paid costs included in a stated labor-cost definition.
Gross wages
Employee earnings before deductions.
Employee withholding
Money withheld from employee earnings for taxes or other obligations.

Three points to remember

  1. Delivery cost requires supported role and employer-cost mapping.
  2. An hourly rate depends on the chosen hour denominator.
  3. Reconcile allocations and keep excluded costs visible.