Calculating hourly cost rates in project-based industries – part 1; capacity modeling

Hourly cost rates are crucial in project costing due to the substantial proportion of labor cost in projects. Critical in this endeavor is to model capacity correctly. While there is much published on capacity modeling, there is nothing published about capacity modeling in project-based industries. This fact in combination with the fact that it is a contentious topic in corporations, makes it an important topic for research. Therefore, in this paper capacity modeling is analyzed and a revised version of the CAM-I capacity model is proposed for project-based industries. Both an example and a case are provided to allow detailed discussions.