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

Appendix 1 Schedule VI

Indirect Materials Rate

Supplies
Cost


Total

Basis of
Allocation

Allocation

Dept. A

Dept. B

Office Supplies

$1,200.00

Misc. Supplies

$800.00

$2,000.00

1/4 to Dept. A
Bal - % Base Hrs. *

$500.00
$717.00


$783.00

Total Indirect Materials Cost

$2,000.00

$1,217.00

$783.00

Divided by Base Hours

4,278

4,685

Indirect Materials rate per Billable Hour

$.28

$.16

From Schedule IV:

Base Hours, Dept. A
Base Hours, Dept. B

4,278
4,685

*47.7%
52.3%

Total Base Hours

8,963

100.0%

Notes to Schedule VI

Each item of indirect material or supply should be separately entered. In some cases, it will be necessary to estimate amounts; if possible use the previous year’s total expenditure, adjusted for the expected increase or decrease.

Indirect materials are not consumed in a direct measurable proportion to the number of units produced. Therefore, distribution is over base hours, as calculated in Column 4 of Schedule IV for each sub-department. (Occasionally it may be more equitable to base the indirect materials rate on percent of direct costs, rather than hours.)

Indirect materials rate is the total dollar amount for the sub-department divided by base hours for the sub-department.

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