Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)
Appendix 1 Schedule V
Indirect Labor Rate
|
1 |
2 |
3 |
4 |
5 |
6 |
| Allocation | ||||||
| Dept. A | Dept. B | |||||
| H | $16,600.00 | - 0 - | $16,600.00 | %*Base Hours | $7,918.20 | $8,681.80 |
| I | 13,000.00 | 3,250.00 | 9,750.00 | 1/4 - A 3/4 - B |
2,437.50 | 7,312.50 |
| J | 10,000.00 | - 0 - | 10,000.00 | 100% - A | 10,000.00 | |
| K | 10,000.00 | - 0 - | 10,000.00 | 100% - B | 10,000.00 | |
| Total Indirect Labor Cost | $49,600.00 |
$3,250.00 |
$46,350.00 |
$20,355.70 |
$25994.30 |
|
| Divided by Base Hours | 4,278 | 4,685 | ||||
| Indirect Labor Rate per Billable Hour | $4.75 | $5.55 | ||||
| From Schedule IV: | ||||||
| Base Hours, Dept. A Base Hours, Dept. B |
4,278 4,685 |
*47.7% 52.3% |
||||
| Total Base Hours | 8,963 | 100% | ||||
Notes to Schedule V
Indirect labor includes all administrative, clerical, and maintenance employees of the department who are not involved directly in production. In the example, Employee "I" is paid 1/4 from another source of funds (as, for instance, from a specific research project) and, therefore, his salary is reduced to the Column 3 "net" of $9,750.
Indirect labor costs may be allocated between departments (or projects) by more than one method. One person’s work (clerical, for instance) may be easily identified at one third for one department, and two-thirds for another. However, a maintenance person’s hours may not be so easily identified. Therefore, that person’s time would be best allocated in the same proportion, or percentage, as the base hours. In our sample, Employee H’s time was allocated this way.
Indirect Labor Rate is the total indirect labor cost for the department divided by total base hours for the department.
Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)