Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)
Appendix 1
Suggested Format for Rate Calculation
This “Suggested Format for Rate Calculation” is designed to serve as a standard, or guideline, for development of rates on an hourly basis. It is intended that rates so derived be used in the billing for services rendered (and material used) in a variety of University departments, shops, and organizations which are, wholly or in part, engaged in such program support activity which justifies establishment of billing procedures. Establishment of the individual operation’s procedures, including granting of authority to charge for services and/or materials, is a separate step; this methodology is strictly concerned with standardization, to the extent possible and desirable, of the rate calculations.
A wide variety of technical service areas require periodic rate analyses, primarily to adjust to changing financial conditions and justify charges made to extramural sources of revenue. Such areas include machine shops, computer installations, duplicating facilities, laboratories and other research facilities, and other support areas. No one method can possibly apply equally well to such a variety of applications; no single procedure can cover all exceptions or alternatives available. This format recognizes this, and, within the purpose of its development, provides the framework within which individual differences can be implemented without destroying the “standardization” principle. Two important by-products, it is hoped, will be compatibility and comparability of the rates between the various operations involved.
The example, the “XYZ Department”, operates two sections, each section requiring a rate. Three employees in Department A, four in Department B (including one half-time employee), and in addition, there are four supervisory employees. Below are the detailed documents.
- General Guidelines
Definitions and Explanations
Schedule I - Calculation of Total Salary Dollars, Including Fringe Benefits
Schedule II - Calculation of Assignable Hours
Schedule III - Billable Hours Ratio
Schedule IV - Direct Labor Rate
Schedule V - Indirect Labor Rate
Schedule VI - Indirect Materials Rate
Schedule VII - Equipment Depreciation Rate
ScheduleVIII - Depreciation Schedule
Schedule IX - Individual Rates
Schedule X - Composite Hourly Rate Calculation
Schedule XI - Conversion of Hourly Rate to Unit Rate
Schedule XII - Final Unit Rate Calculation Including Direct Materials
The schedules you use in the construction of your rate will depend upon your funding source and whether you are required to recover your full operating costs.
Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)