How do I calculate labor cost for handmade items?

Use this formula for labor cost:

Labor cost per item = hourly rate × minutes spent ÷ 60

Then add it into your total price:

Price = materials + labor + overhead + profit

How to choose the labor rate

Pick an hourly rate that reflects the skill and time involved. A common method is to set one rate for all your work, then use it consistently.

Example

If an item takes 45 minutes and you want to pay yourself $20/hour:

• 45 ÷ 60 = 0.75 hours
• 0.75 × $20 = $15 labor cost

If materials are $8 and overhead allocation is $2, your base cost is:

• $8 + $15 + $2 = $25

Then add profit, for example 25%–50%, depending on your market and product type.

A simple way to do it for handmade items

1. Time how long one item really takes from start to finish.
2. Multiply by your hourly labor rate.
3. Add materials.
4. Add a share of overhead.
5. Add profit.

Quick tip

If you’re making several items, track labor for a few real pieces and average them. That usually gives a more accurate price than guessing.