Procedure: 403-Revenue Producing Activities

Definitions

Annual Salary
Salary paid to employee before any deductions.
Byproduct Costing
A method of allocating costs to a saleable product (a byproduct) resulting from an activity that was not undertaken to generate the byproduct.
Capital Equipment
By Wisconsin Department of Administration definition, equipment having an acquisition cost of $5,000 or more and a useful life of one or more years.
Competition
Businesses not affiliated with the University that offer the same goods or services as an RPA. As it relates to the private sector, the University will not engage in the sale of a good or service to the public unless the activity is related to or a byproduct of the University's mission (instruction, research or outreach). The sale of ice cream produced as a byproduct of Dairy Plant Management courses is an example of an acceptable competitive activity.
Composite Rate
Final rate which includes two or more cost categories. Also, a labor rate which includes two or more individuals, or classes of individuals, having different rates of pay, for which the costs are averaged in calculating the rate.
Cost Accounting Standards
A set of uniform cost accounting principles, developed by the federal Cost Accounting Standards Board, which must be followed by the university as a recipient of federal funds.
Cost Allocation
The assignment and reassignment of a cost or group of costs to one or more activities. For an RPA this term refers to costs of operation that are not specifically identifiable with a specific good or service.
Cost Pool
A grouping of expense items used in the determination of cost of a function or activity.
Cost Recovery
The recovery of only actual costs incurred. In terms of federal projects the university normally enters into agreements with the government to charge only actual costs to the projects when the money is accepted.
Depreciation
A method of allocating the cost of capital equipment and other fixed assets in a systematic and rational manner to those periods expected to benefit from the use of the asset.
Direct Labor
All labor that is physically traceable to the finished good or service.
External Customers
A customer who is not from UW-Madison or any UW institution. For rate setting purposes, external customers include: students, faculty, staff, private organizations, student organizations, nonprofits, alumni associations, municipalities, local K-12 school districts, local vocational and technical schools, counties, and colleges and universities outside the UW System, and the general public.
Fringe Benefit Dollars
Annual (or base period used) salary multiplied by applicable fringe benefit rate percentage. Actual fringe benefits should be calculated for 128 funded RPA's.
Fringe Benefit Hours
Number of hours earned for vacation, holidays and sick leave during applicable period.
Fringe Benefit Hours Used
Number of hours used for vacation, holidays and sick leave during applicable period.
Fringe Benefit Rate
Fringe benefit percentage rate applicable for any particular payroll classification for the year for which rates are being calculated. Current fringe benefit rates are available from The Office of Research and Sponsored Programs.
General Accepted Accounting Principles (GAAP)
A set of codified accounting standards established by authoritative accounting rulemaking bodies, principally the Financial Accounting Standards Board or the Governmental Accounting Standards Board. Accounting practices deemed to be appropriate because of universal application over time.
Hours
Actual Hours Worked
Total hours for which employee was paid less fringe benefit hours actually used.
Assignable Hours
Number of hours by which total cost in all categories must be divided to arrive at rate per billable hour. (For method of calculating, see Billable Hours Ratio).
Base Hours
The total hours available for an employee in the year. For full time employees this is 2080 hours (assumes a 40 hour workweek for 52 weeks). For employees working less than full time the base hours would be adjusted according to the percentage of employment. For hourly employees (LTE's, Students, etc.) hours worked and base hours are the same.
Billable Hours
Only those hours that are directly spent and billed to a specific project.
Billable Hours Ratio
Expressed as a percent = Billable Hours divided by Actual Hours Worked.
Chargeable Hours
Employee hours that can be identified with a specific good or service; also referred to as productive hours because they are either billed or directly allocated to a good or service.
Cost Per Actual Hour Worked
Total salary dollars divided by assignable hours.
Indirect Cost
A cost or group of costs that are not directly identified with an activity.
Indirect Cost Rate
A surcharge assessed against a good or service to recover allocated costs that are assigned to that good or service. The negotiated federal indirect cost rate is the most familiar to campus employees, but all RPAs incur internal indirect costs and may assess their own internal rate for the goods or services of the RPA.
Indirect Labor
All labor that is not direct labor.
Internal Customer
A customer from UW-Madison or any UW System institution. For rate setting purposes, Wisconsin state agencies are designated as internal customers. All internal customers pay for goods and services using state or federal funds.
Job Costing
A method of allocating costs to individual products or services that receive varying attention and effort.
MTDC Modified Total Direct Costs
The University overhead (not departmental) rate allowed by federal grant authority is a percent of Modified Total Direct Costs. These costs include salaries and wages, fringe benefits, materials and supplies, travel and subgrants and subcontracts up to $25,000. The 1998 - 2000 rate is 44%.
Process Costing
A method of allocating costs to like products that are massproduced in continuous fashion through a series of production steps called processes.
RPA Overhead
Costs internal to an RPA that cannot be directly associated to the goods or services sold. They are typically pooled and then assigned on a formula basis to all goods or services sold.
Rate Documentation
All worksheets, spreadsheets, timesheets, analyses, calculations and other paper work which support the computation of rate(s) charged for goods or services.
Revenue Producing Activity
An operation or activity, other than a major auxiliary, that charges for goods or services and operates on fund(s) 101, 128, 136, or occasionally fund(s) 133 or 144.
Subsidy
Funds from a source other than funds generated by the RPA to cover some or all costs of that particular RPA (operational subsidy) or to cover part of the charge to a customer for a good or service (rate subsidy). In the context of an RPA, subsidies may be direct in the form of cash transfers to move expenses off the activity or indirect in the form of directly paying for consumable supplies, equipment acquisition or salaries and wages of staff involved in the RPA from another source.
Total Salary Dollars
Annual salary (or base period used) plus fringe benefit dollars. Costs of fringe benefits are a cost of the period during which they are earned, whether or not used during that period. Therefore, when calculating total annual salary dollars, the cost of all fringe benefits related to salary earned that year are included.
Unbillable Hours
That portion of time of an employee who is directly involved in a project (as opposed to administrative or maintenance employees for example) spent on matters not directly chargeable to a project. (e.g., cleanup, departmental meetings, breaktime, reading mail, etc.).
University Overhead Rate
Percentage of total modified direct costs which is charged to recover indirect costs such as utilities, libraries, business services.
Unrelated Business Income Tax
Federal tax assessed to a not-for-profit organization in lieu of federal income tax on income generated by the organization from activities not related to the organization's mission.

Procedure: 403-Revenue Producing Activities