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About using fixed percentages only

Fixed percentages are your best estimates of direct personnel expense (DPE) and overhead percentages. This method produces a more uniform calculation of DPE and overhead costs than the cost- and hours-based methods because it is unaffected by direct labor costs or hours.

DPE

If you want to track DPE separately, use the following formula to calculate the percent and enter it in the Company > Preferences > Payroll tab > DPE % field. If you have different percents by department, perform the calculation for each department and enter it in the Company> Departments > DPE % field.

Calculating DPE percent

Typically, DPE percent is calculated as the total annual staff-related benefits cost divided by the total direct salary costs.

For example, if the direct salary cost is $50,000 and the benefits cost is $16,000, the DPE percent is:

$16,000 / $50,000 = 32.00%

Calculating DPE

The DPE amount added to your project labor cost is calculated as follows:

Cost Amount x DPE Percent

For example, if the cost is $300 and DPE percent is 32.00%, then:

$300 x 32.00% = $96

Overhead

With Ajera, you can include your overhead cost when reporting your project cost. There are two common ways of calculating your overhead percent:

Direct labor + DPE as the base
Direct labor as the base

Direct labor + DPE as the base

Use this method if you want to track your DPE separately from your general overhead expense when viewing project cost and you have entered your DPE percents.

Calculating overhead percent

Using this method, overhead percent is calculated as the company's total operating cost (not including employer-paid payroll taxes or discretionary bonuses) minus direct project labor, DPE, and direct project expenses divided by the direct labor cost plus DPE.

For example, if the total cost for the company before employer-paid payroll taxes and bonuses is $150,000, the direct labor is $50,000, the DPE costs are $16,000, and direct expenses are $10,000, the overhead cost is:

$150,000 - ($50,000 + $10,000 + $16,000) = $74,000

The overhead percent is:

$74,000 / ($50,000 + $16,000) = 112.12%

Calculating overhead

The overhead amount that is added to your project labor cost is calculated as follows:

(Cost Amount + DPE) x Overhead Percent

For example, if the cost is $300, the DPE amount is $96, and the overhead percent is 112.12%, then:

($300 + $96) x 112.12% = $444

Calculating burden

Burdened project cost is calculated as follows:

Cost Amount + DPE Amount + Overhead Amount

For example, if the cost amount is $300, the DPE amount is $96.00, and the overhead amount is $444, then burdened project cost is:

$300 + $96 + $444 = $840

Direct labor as the base

Use this method if you do not want to track your DPE separately from your general overhead expense when viewing project cost.

Calculating overhead percent

Using this method, overhead percent is calculated as the company's total operating cost (not including employer-paid payroll taxes or discretionary bonuses) minus direct project labor and direct project expenses divided by the direct labor cost.

For example, if the total cost for the company is $150,000, the direct labor is $50,000, the direct expenses are $10,000 then the overhead cost is:

$150,000 - ($50,000 + $10,000) = $90,000

The overhead percent is:

$90,000 / $50,000 = 80.00%

Calculating overhead

The overhead amount that is added to your project labor cost is calculated as follows:

Cost Amount x Overhead Percent

For example, if the cost is $300 and the overhead percent is 180.00%, then:

$300.00 x 180.00% = $540

Calculating burden

Burdened project cost is calculated as follows:

Cost Amount + Overhead Amount

For example, if the cost amount is $300 and the overhead amount is $540, then burdened project cost is:

$300 + $540 = $840