Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)

Appendix 1 Schedule XI

Conversion of Hourly Rate to Unit Rate

A single per unit rate is only acceptable for like units. To convert the rate per billable hour to rate per unit, you must first determine how much time is required to produce one unit. This may be done by either of the following methods:

Method I: Divide base hours by number of units produced during the base period. This method requires having records of units produced, which may not be available, especially for a beginning operation.

1

Base Hours
Sch IV

2

Units
Produced

3
Hours Per
Unit
Col 1 / Col 2

4
Hourly
Rate
Sch X

5
Rate Per
Unit
Col 3 X Col 4

Dept. A

4,278

5,000

.86

22.16

$19.06

Dept. B

4,685

5,000

.94

20.06

$18.86

Composite Rate Per Unit

$37.92


Method II: Time Studies - Should be performed by someone woth reasonable skill and knowledge of the operation. They should be repeated on a periodic basis, and at any time the production technique changes.

1

Minutes
Per Unit

2
Hour Per
Unit
Col 1 / 60

3
Hourly
Rate
Sch X

4
Rate Per
Unit
Col 2 X Col 3

Dept. A

52

.87

22.16

$19.28

Dept. B

57

.95

20.06

$19.06

Composite Rate Per Unit

$38.34

Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)