When a business’s costs are majority overhead, ie. manufacturing, you would expect to have these costs covered (and then some for profit of course) within your normal billable hours….
If Inmplementing overtime, aren’t you thus savings the allotted cost per hour for overhead, therefore making more profit per hour? Now, I suppose you would have to consider that overtime also involved paying employees 1.5x but if said .5x of the wage was lesser than the allotted overhead/hour, isn’t that more profit per hour than non-overtime? (In additional to the usual benefit of this being added revenue that wasn’t expected).
Would it only be once the increased wage cost becomes higher than the charged hourly price, that overtime wouldn’t make any sense ? (at least without an additional charge - and this being in cases where the overtime is due to customer demands, not due to your inefficiencies)
note: of course, overtime would be a lot more of consideration than just numbers as your employees well beings and the longevity/sustainability of it is a lot more of a factor, but at least from a math perspective - what am I missing?
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You are talking about marginal profit for each additional service offered ine overtime. If the marginal revenue from offering the additional product/service is greater than the marginal cost of labor (overtime) plus other marginal costs, it will lead to more profit. The “allocated overhead cost” is a fixed cost that shouldn’t affect the decision (assuming you take any marginal depreciation into account in marginal costs).
Wether you make make more or less profit than regukar hours, that depends on how you allocated fixed costs, but what actaully matters is if it increases your total profit (marginal profit).