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CP-235 Revenue Formulas: Complex Revenue Calculations and How to Use Them EffectivelyPresented by:
Traci Rowland, Baker Tilly / Beers + Cutler
Jennifer Goode, Baker Tilly / Beers + Cutler
1
Agenda
• Review Available Revenue Formulas
• Explain Calculations & Opportunities for Use– Loaded Labor Formulas (T&M)
– Multiplier Formulas
– Estimate to Complete
– Estimate at Completion
• Functions that Refine Revenue Calculations– Direct Cost Ceilings
– Burden Cost Ceilings
– Cost Fee Overrides
– Multiplier Overrides
• Provide examples of how our clients have used these formulas to generate revenue systematically for more challenging contract types
Copyright © 2010 Deltek, Inc. 2
Review Available Revenue Formulas
• There are 26 revenue formulas in Costpoint 6.1—based on contract type, these formulas include:
Copyright © 2010 Deltek, Inc. 3
Transaction-Based(Cost Plus/Time & Materials)
Non-Transaction Based(Firm Fixed Price/Award)
– Loaded Labor Rate– Loaded Labor Rate Plus Cost Incurred On Non-Labor (T&M)– Loaded Labor Plus Non-Labor Plus Burden on Non-Labor– Loaded Labor Plus Non-Labor W/Burden W/Fee– Loaded Labor Rate W/Fee Plus Non-Labor W/Burden
W/Fee– Loaded Labor Rate W/Burden W/Fee Plus Non-Labor
W/Burden W/Fee– Rate Schedule Times Multiplier Plus Non-Labor Times
Multiplier– Labor Cost Times Multiplier Plus Non-Labor Times Multiplier
(Costs) – Labor Cost Times Multiplier Plus Non-Labor Times Multiplier
(Hours)– Fee on Hours Plus Cost Incurred– Cost Plus Fee On Cost– Cost Plus Fee On Cost Current Month
– Do Not Compute– Cost Incurred Using Estimate To Complete– Cost Incurred Using Estimate At Completion– Contract Value Times Percent Complete– Contract Value Times Percent Complete Vs.
Rate Schedule– Fixed Amount Month To Date– Fixed Amount Year To Date– Fixed Amount Contract To Date– Equal To Billings Before Retainage– Equal To Billings After Retainage– Contract Value Less Backlog– Equal To Deliveries– Equal To Project Ledger Sales– Unit Revenue Only
Loaded Labor Formulas
• Used when computing revenue using loaded labor rates
• The labor portion of the formula is computed by multiplying the assigned labor rate by the hours incurred by PLC
• Non-labor amounts posted in the general ledger are included in Loaded Labor Plus Non-labor formulas
• Other variations of Loaded Labor Formulas include:– Loaded Labor Plus Cost Incurred on Non-Labor
– Loaded Labor Plus Non-Labor Plus Burden on Non-Labor
– Loaded Labor Plus Non-Labor W/ Burden W/ Fee
– Loaded Labor Rate W/Fee Plus Non-Labor W/ Burden W/ Fee
– Loaded Labor Rate W/ Burden W/ Fee Plus Non-Labor W/ Burden W/ Fee
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Loaded Labor Formulas
• Loaded Labor Rate Plus Cost Incurred on Non-Labor (T&M) =
Copyright © 2010 Deltek, Inc. 5
Loaded Labor
Non-Labor
Labor Hours x Labor Rate
+
Loaded Labor Formulas
• Loaded Labor Plus Non-Labor Plus Burden on Non-Labor =
*Example only—burden is applied based on company’s indirect cost pool structure
Copyright © 2010 Deltek, Inc. 6
Burden on Non-Labor
Loaded Labor
Non-Labor ++
G&A* x Non-Labor
Loaded Labor Formulas
• Loaded Labor Plus Non-Labor w/ Burden w/ Fee =
Copyright © 2010 Deltek, Inc. 7
Loaded Labor
Non-Labor
Burden on Non-Labor++ + Fee
Non-Labor x (1 + Fee Rate)
Loaded Labor Formulas
• Loaded Labor Rate w/Fee Plus Non-Labor w/ Burden w/Fee =
Copyright © 2010 Deltek, Inc. 8
Loaded Labor
Non-LaborBurden on Non-Labor++ Fee+Fee +
Labor x (1 + Fee Rate)
Loaded Labor Formulas
• Loaded Labor Rate w/Burden w/Fee Plus Non-Labor w/Burden w/Fee =
*Example only—burden is applied based on company’s indirect cost pool structure
Copyright © 2010 Deltek, Inc. 9
Loaded Labor
Non-Labor
Burden on Non-Labor++ Fee+Fee +Burden
on Labor
(Labor x Fringe) + (Labor x OH) + (Labor x G&A)*
+
Multiplier Formulas
• Revenue calculated by applying a multiplier to labor and non-labor costs that are posted in the general ledger
Note: labor costs should have a Project Labor Category (PLC) assigned to them
• Variations of Multiplier Formulas include:– Rate Schedule times Multiplier Plus Non-labor times Multiplier
• Revenue calculated using labor rates and rate types
– Labor Cost times Multiplier plus Non-Labor times Multiplier (Cost)
– Labor Cost times Multiplier plus Non-Labor times Multiplier (Hours)• Revenue is computed using actual rates for hours
Copyright © 2010 Deltek, Inc. 10
Multiplier Formulas
• Rate Schedule times Multiplier Plus Non-Labor Times Multiplier =
*Multiplier amount is based on contractual agreement
Copyright © 2010 Deltek, Inc. 11
Labor Cost
Non-Labor Cost+Multiplier*x Multiplier*x
Cost Incurred Using Estimate to Complete
• Project costs to complete and inception-to-date (ITD) losses must be estimated first
• ITD allowable costs divided by the estimated costs to complete (entered in the Basic Revenue Info screen at the revenue level of the project)
• This percentage is then multiplied by the contract value less any ITD losses to yield ITD revenue for the project
• The sum of the revenue in the Prior Year Cost and Revenue screen is subtracted from the ITD revenue, and the difference is the current period revenue
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Estimate to Complete
Copyright © 2010 Deltek, Inc. 13
Example: $20,000 Contract Value
Prior Year Allow. Costs
YTD Allow. Costs
ITD Allow. Costs
1,500
+ 2,500
= 4,000
ITD Allow. Costs
ITD Allow. Costs + ETC
ITD Revenue
÷ 14,000
4,000
= 30% Current Period Rev.
ITD Revenue
Previous Period Rev. - 1,000
6,000
= 5,000
ITD Allow. Costs
Estimate to Complete
Total
+ 10,000
4,000
= 14,000
Contract Value
ITD Cost % Complete
ITD Revenue
x 30%
20,000
= 6,000
Cost Incurred Using Estimate at Completion
• Project costs at completion and inception-to-date (ITD) losses must be estimated first
• ITD allowable costs are divided by the estimate at completion entered less any ITD losses
• This percentage is then multiplied by the contract value less any ITD losses—the resulting figure is compared to ITD revenue already recognized
• The difference between the already recognized revenue and the revenue calculated is the current period revenue
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Estimate at Completion
Copyright © 2010 Deltek, Inc. 15
Example: $10,000 Contract Value
Prior Year Allow. Costs
YTD Allow. Costs
ITD Allow. Costs
2,000
+ 3,500
= 5,500
Contract Value
ITD Cost % Complete
ITD Revenue
x 55%
10,000
= 5,500 Current Period Rev.
ITD Revenue
Prior Period Rev. - 1,000
5,500
= 4,500
ITD Allow. Costs
Estimate at Completion
ITD Cost % Complete
÷ 10,000
5,500
= 55%
Functions that Refine Revenue Calculations
• The following slides demonstrate a sampling of actual contract revenue scenarios as well as functions to refine revenue calculations
• Direct Cost Ceilings
– Used to restrict the calculation of billing and/or revenue on specific direct cost accounts
– The ceiling becomes the not-to-exceed value for direct costs in these calculations
• Burden Cost Ceilings
– Used to impose ceilings for project/account/pool combinations
– The ceiling becomes the not-to-exceed rate for the project
• Cost Fee Overrides
– Used to establish an override fee percent for direct costs on the project
– The override fee percent is used in place of the percent entered in the Basic Revenue Info screen—if using the Cost Incurred Plus Fee on Hours revenue/billing formula, an override fee on hours can be established as well
• Multiplier Overrides
– The multiplier override percent will be used in place of the percentage entered in the Basic Revenue Info screen or Project Billing Info screen when revenue and billings are calculated
Copyright © 2010 Deltek, Inc. 16
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FFRE Client Examples
FFRE Client Example
• Contract Type—Firm Fixed Priced with Reimbursable Expense
• Special Considerations:• Estimate to Complete• Direct Cost Ceilings
FFRE Client Examples
• Contract Type—FFRE– Labor Revenue—Estimate to Complete– Expenses Revenue—Loaded Labor Rate Plus Cost Incurred on Non-Labor– Billing—Loaded Labor Rate Plus Cost Incurred on Non-Labor
Copyright © 2010 Deltek, Inc. 18
Contract LevelLevel 1
Billing LevelLevel 2
Labor/RevenueLevel 3
Expenses/RevenueLevel 3
Revenue – ETCDirect Cost Ceiling (A)
Billing Level• Billing Formula – LLRNL• Scheduled Bill
Revenue – LLRNL
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T&M Client Examples
T&M Client Example
• Contract Type—Time & Materials• Special Considerations:
• Burden on Non Labor• Master Rate Schedule
T&M Client Examples
• Contract Type—T&M– Revenue and Billing—Loaded Labor Plus Non-Labor Plus Burden on Non-Labor
Copyright © 2010 Deltek, Inc. 20
Contract LevelTM01
ChargingLabor
ChargingNon-Labor
ChargingNon-Labor
ChargingLabor
Revenue/Billing/Total Ceilings
TM01.02
Revenue/Billing/Total Ceilings
TM01.01
Revenue & Billing - LLRNLBNL
Revenue & Billing - LLRNLBNL
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USAID Client Examples
USAID ContractClient Example
• Contract Type—Time & Materials—USAID • Special Considerations:
• TCN/CCN Labor• Labor Multipliers• Multiplier Override
USAID Client Examples
• Contract Type—CPFF– Revenue and Billing—
Rate Schedule times Multiplier Plus Non-Labor Cost times Multiplier
Copyright © 2010 Deltek, Inc. 22
REG LaborLevel 4
ExpensesLevel 4
TCN LaborLevel 4
CCN LaborLevel 4
Option YearLevel 2
Contract LevelLevel 1
Billing/RevenueLevel 3
Revenue & Billing – RSMNLM
Labor Multiplier – 2.0700Non-Labor Multiplier – 1.0000
Multiplier Override
Questions
Copyright © 2010 Deltek, Inc. 23
Speaker Contact Information
Copyright © 2010 Deltek, Inc. 24
• Traci Rowland, Director, Baker Tilly– Direct Dial: 703-923-8218
– Email: [email protected]
• Jennifer Goode, Manager, Baker Tilly– Direct Dial: 703-923-8695
– Email: [email protected]