Contribution per Bottleneck Hour: Choose Work When Capacity Is Full
When one machine or specialist limits output, compare jobs by contribution per hour of that scarce resource. Include setup time and the costs that change with the work. Then check demand and existing commitments. The job with the largest invoice may leave less contribution from the hours you have available.
What you’ll get from this guide: Rank feasible jobs and prepare a capacity schedule with demand limits.
- Use hours at the actual bottleneck, including setup.
- Keep fixed payroll and variable labour costs distinct.
- Respect demand limits and already agreed delivery commitments.
Use this comparison when there is more work available than one part of your business can handle. It does not set your charge-out rate; the hourly-rate guide does that. Here the task is to use the next available block of capacity well.
Find what actually limits delivery
Trace work from order to completion. A queue at a finishing machine, a specialist review or a delivery slot can constrain output even when other staff have spare time. Record usable hours after maintenance and existing bookings. Do not assume every paid hour is available to sell.
Contribution per bottleneck hour is job revenue minus costs that change with the job, divided by its scarce hours. Fixed payroll that remains payable either way is outside this short-period contribution calculation. If labour genuinely varies with each job, include it. Relevant-cost principles distinguish changes caused by a choice from costs that remain.
Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax.
| Job | Revenue | Variable costs | Contribution | Run + setup hours | Contribution/hour | Demand limit |
|---|---|---|---|---|---|---|
| A | $1,000 | $400 | $600 | 7 + 1 = 8 | $75 | 2 jobs |
| B | $700 | $280 | $420 | 3.5 + 0.5 = 4 | $105 | 3 jobs |
| C | $600 | $120 | $480 | 5 + 1 = 6 | $80 | 2 jobs |
Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.
Job B ranks first, C second and A third. Job A has the largest invoice and contribution per job, but the lowest contribution per scarce hour. Job C has the highest percentage contribution, yet B uses the bottleneck better.
Fit the jobs into the available hours
Assume 24 uncommitted hours remain, jobs are indivisible and the table's demand is confirmed. Three B jobs use 12 hours and contribute $1,260. Two C jobs use the other 12 hours and contribute $960. Total contribution is $2,220. An alternative of two A jobs and two B jobs uses the same 24 hours but contributes $2,040.
Under these assumptions, the difference is $180. It is not an instruction to cancel A orders. Reserve already committed work first, or discuss an agreed change. A short-term ranking also leaves out customer relationships, quality requirements and future demand.
Check setup and labour assumptions before relying on it
The table includes one setup per job. If several jobs share a setup, calculate the batch instead. If jobs have indivisible sizes, sequence-dependent setup or multiple constrained resources, the highest hourly ranking does not automatically produce the best whole schedule. Enumerate the feasible combinations or get planning help.
Avoid deducting paid staff costs from both variable costs and the final fixed-cost total. Keep the existing basis consistent when estimating contribution displaced by a new service. If buying in a component frees the constraint, compare the added purchase cost with the contribution you can actually earn using the released hours in the make-or-buy worksheet.
Where to get help
Review the capacity sheet with whoever performs the work and your accountant. Record actual setup and completion times for the next few jobs. The pricing and profit hub contains the related cost and scheduling guides.
Where to go from here
Make or Buy? Compare Avoidable Costs and Released Capacity
Compare sourcing costs and the use of released capacity.
3 min readWill a New Service Add Profit or Just More Work?
Cost a new service and the work it displaces.
3 min readRepair or Replace Business Equipment? Compare Future Costs
Continue the “compare operating choices” reading sequence.
3 min read
General information only. This guide doesn't take your personal or business circumstances into account and isn't financial, legal or tax advice. Rates and thresholds change — check the official sources linked in this guide and get qualified advice where your circumstances require it.