In the service world, you’re selling a product, but the product is time. So yes, you should absolutely be looking at profit per hour, because that hour is what you’re selling.
Think of it this way, a plumber that is repairing a short section of building drain that was damaged for some reason. The only items that went into that repair would be 2’ of 4" PVC, 2 couplers, and some glue. Let’s say $20 in material.
But, he’s got an hour in running a camera snake to locate and diagnose the fault. 2 hours of digging with a $60k mini excavator, 20 minutes of pipe repair and then an hour of backfill/cleanup. 4.5 hours, plus drive time.
If he charged $200, he’s got a 1000% markup on this job. Looking at it as gross profit per job, he’s killing it. But as gross profit per hour? He’s out of business next week.
Taking it a step further, he can’t just look at it per hour. That 4.5 hours plus drive time? The next job is an hour away, and will take 6 hours. Needs to be done in one day, as it requires customer’s water to be shut off for the duration. It’s winter and gets dark at 4:30. Does he have time to complete the next job, or was that first one all he does in a day? For that reason, best also consider things by the day, week, etc, otherwise he could be profitable on the 4.5 hour job, but still be in the red when looking at that particular Monday.
Yes. When you refer to manufacturing for others, that sounds like job shop work to me, and that’s exactly how that kind of business calculates prices in most cases.