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Calculations for Hours-Based Cost Pools

This topic describes the calculations performed by Costpoint when you use hours-based cost pools.

When setting up cost pools (non-service centers), you can choose from two basis types — dollars and hours. The dollars-basis cost pools allocate the total of the pool costs over the total amount in the pool base. Costpoint computes the rate as a percentage rate (total pool cost amount/total pool base amount). Conversely, the hours-basis cost pools allocate the total of the pool costs over the total hours in the pool base. Costpoint computes the rate as an amount per hour (total pool cost amount/total hours in the pool base).  

You can set up a cost pool as an hours-based pool by selecting Hours as the Basis Type on the Manage Cost Pools screen. After you select this check box and save the cost pool, you cannot change this setting.

Warning: If a cost pool is hours-based, do not include allocation accounts from other cost pools or service centers or any accounts that do not have incurred hours in their base. This causes composite rates to compute incorrectly.

For hours-based cost pools, Costpoint uses the pool cost over the pool base hours to compute the actual amount-per-hour rate. This rate is stored on the Pool Rates subtask (POOL_RT_TABLE) of the Manage Cost Pools screen, along with user-entered target, provisional, and/or COM rates. The rate is stored on the Pool Rates subtask as a real number rather than as a percentage.  

As with dollar-based cost pools, burden cost ceilings can be used with hours-based cost pools. To accommodate this, a column, Rate Format, was added to the Manage Burden Cost Ceilings screen. All rates, for both pool basis types, are stored as real numbers rather than as percentages, and the Rate Format column indicates whether the number is Amt/Hr or %.  

Burden rate columns were added to PROJ_BURD_SUM to store composite rates for dollars- and hours-based cost pools when burden is computed. Costpoint applies the hours-based rate only to accounts with hours in the base.

You can have accounts from an hours-based cost pool feed into a dollars-based cost pool. When this happens, Costpoint adds the hours-based burden to the cost-based burden and inserts the sum into the PROJ_BURD_SUM table in existing burden columns. Costpoint uses the ALLOC_APPLIC table as the map for applying the rates in the project tables for both hours- and dollars-based cost pools. Allocation accounts work the same for both types of cost pools, except that allocations from dollars-based cost pools must never feed into an hours-based cost pool.    

Regardless of the basis type, Costpoint computes the amount to post based on the dollar balance in the pool debit allocation accounts in FS_SUM.

Consider the following points:

  • The Statement of Indirect Expenses includes current period base hours and YTD base hours, just as period and YTD base amounts now display for dollars-based pools. Rates for hours-based cost pools now display on the report as real numbers rather than as a percentage.
  • Costpoint derives the allocation base for a given cost pool by adding the hours charged to the General Ledger for all account/organization combinations that are set up as the base of the pool.
  • Rates or dollars per hour entered on the Burden Cost Ceilings screen of the Manage Project User Flow are also considered when applying rates against the incurred hours in PROJ_SUM when burden and revenue and/or billing is computed. The Rate Format column indicates whether the burden is Amt/Hr or %.
  • Standard bills and Progress Payment bills are burdened based on hours in OPEN_BILLING_DETL. Burdens are also applied against retroactive bills based on indirect rate calculations for both pool types.    
  • In Advanced Project Budgeting, budgets with burden templates that include hours- and dollars-based cost pools have burdens computed based on budgeted hours as well as cost. The burden amount per hour displays separately from the burdens on costs.
  • On project reports, pool rates display as an amount per hours in the functional currency of the company.