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Lesson 3: Key concepts

A good understanding of these important concepts will help you as you work with Ajera.

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DPE and overhead

Why is it important?

When you track direct personnel expense (DPE), your profit is not overstated on your project reports because project cost more accurately reflects the true cost of labor.

Understanding, estimating, and tracking the cost of DPE and overhead is an important part in running the day-to-day operations of a firm.

What does DPE stand for?

DPE stands for direct personnel expense. It represents all the cost you pay on behalf of your staff. It includes all paid time off, salaries, fringe benefits, and employer taxes. It is the method Ajera uses to burden labor cost in project reports.

What is overhead?

Overhead is all general operating expenses. It includes expenses such rent, utilities, and indirect labor that is not paid time off.

Why are DPE and overhead important?

DPE and overhead provide a more accurate picture of the labor cost on your projects.

To evaluate project profit accurately, you can put Ajera to work for you as follows:

Set up Ajera to track hidden costs, such as DPE and overhead.
Use accurate percentages to calculate DPE and overhead.
Include overhead when looking at cost on project reports.

How do you distribute DPE and overhead?

With Ajera, you can select to distribute DPE and overhead in one of the following ways, which you set on the Company > Preferences > Payroll tab:

Use fixed percentages. Distribute DPE and overhead based on fixed percentages. (You calculate the percentages either with a Financial Statement Design formula or on a separate spreadsheet.)
Distribute based on costs. Calculate DPE and overhead based on direct labor cost and distribute accordingly.
Distribute based on hours. Calculate DPE and overhead based on direct labor hours and distribute accordingly.

Fixed percentages

Fixed percentages are your best estimates of your firm's DPE and overhead percentages. This method produces a more uniform calculation of DPE and overhead costs on your project reports because it is unaffected by direct labor costs or hours.

When inputting fixed percentages, you can either lump all burden into the Overhead field, or if separating DPE from overhead, be sure to calculate the overhead percentage as a percentage of direct labor and DPE costs (OH/[DL+DPE]).

Based on costs or hours

The cost-based and hours-based methods are more precise because they calculate DPE and overhead costs based on direct labor costs or hours from your Expense and Other Income accounts.

Since your costs and hours vary over time, Ajera temporarily uses fixed percentages to represent DPE and overhead costs on project reports. It replaces the fixed-percentage amounts with the cost-based or hours-based amounts after you distribute DPE/overhead costs.

What is G&A?

G&A is General and Administrative costs. These costs are typically part of your overhead costs and can be redistributed relative to direct labor cost to reflect the total cost of the project. You may select to mark up cost on your billing rates tables by a specific amount for G&A.

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DPE and overhead

Payroll variance