Bill Canady explains how to calculate a burden rate by combining indirect costs into one defensible number you apply to direct labor hours. A single, well-documented rate beats multiple precise pools because it's easier to understand and trust for internal decisions.
Step 2, apply the burden rate. Take your indirect labor and your facility and your equipment costs and turn them into a rate you can apply to direct labor hours. Very straightforward. Or whatever your true driver is. One rate, defensible, documented, fully burdened. You will get an argument here about precision. Somebody will want 12 burden pools. Don't. A single defensible rate that everyone understands beats an elegant model that 3 people can explain and nobody trusts. You are not doing this for the auditors. You're doing it to make a decision. This number's for you, not to prove to someone else.
