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Fee on Hours Plus Cost Incurred

This method summarizes the allowable direct and indirect costs incurred and a set fee per hour to arrive at revenue amounts. With this method, allowable costs and burdens must first be determined.

To arrive at allowable costs, Costpoint compares costs in the PROJ_SUM table to cost ceilings on the Manage Direct Cost Ceilings screen. You can set cost ceilings at the summary or detail account level. You can also set them at multiple project levels. Only ceilings set at project levels equal to or lower than the level of the revenue formula are observed, however. For example, you set up a three-level contract. The revenue formula exists at the second level, and costs are charged at the third level. Ceilings set at the second or third level are observed when allowable costs are determined. However, ceilings set and costs incurred at level one of the project are ignored. Ceilings on direct costs are established on the Manage Direct Cost Ceilings screen of the Project User Flow and the ceilings on indirect costs are established on the Manage Burden Cost Ceilings screen.

After determining allowable costs and burdens, Costpoint applies the fee. It multiplies the fee per hour rate from the revenue formula by the hours charged to determine the fee amount.

Fee overrides are next taken into consideration. Fee overrides are set by account for both direct and burden costs. The cost and burden fee overrides are set up on the Manage Cost Fee Overrides screen and the Manage Burden Fee Overrides screen, respectively. Overrides can exist at higher project levels. For example, you set up a three-level project with the revenue formula at level 2. Costs are charged at level 3. The project has a fee percentage of 10%, except for travel costs, which receive a fee of 2%. You can set up a fee override percentage of 2% at the top level of the project for all project accounts to which travel is charged. Costpoint observes this override when calculating revenue. Overrides can increase or decrease fee calculations.

Use caution; a fee override modifies the fee computed from hours. Fee overrides are based on costs, rather than hours.

The next step is to apply contract fee ceilings. Contract fee ceilings are set on the Manage Total Ceilings screen. If a code of R displays next to the ceiling amount, the ceiling is used for revenue purposes. If a code of A displays next to the ceiling amount, the ceiling is used for revenue and billing. If total fee computed exceeds the fee ceiling, a credit is placed in the PROJ_SUM table at the revenue account of the owning organization at the project level at which the revenue formula is entered. Thus the amount of fee calculated is the allowable fee. Costpoint adds the allowable fee to allowable direct costs to arrive at a total revenue amount. Revenue for the fiscal year up to and including the subperiod being calculated is summarized to arrive at year-to-date revenue recognized. Prior year revenue is summarized on the Manage Prior Year Cost and Revenue screen and added to year to date revenue to arrive at contract to date revenue recognized.

Costpoint compares this revenue amount to the Contract Value set on the Manage Total Ceilings screen. If a code of R displays next to the amount, this value is used as a total revenue ceiling amount. If a code of A displays next to the amount, this value is used as a total revenue and billing ceiling amount. If total revenue computed exceeds the revenue ceiling, a credit is placed in the PROJ_SUM table on the revenue account of the owning organization at the project level at which the revenue formula is entered. Thus the amount calculated is allowable total revenue.

If you are posting revenue by performing org, you need to run the Redistribute Revenue screen at this time to reallocate revenue across organizations that incurred the over-ceiling costs and fee proportionately.

Please note that revenue is calculated on a period-by-period basis. Allowable costs and fee incurred for a given period constitute revenue for that period. Adjustments made to prior period costs are reflected in the revenue recognized for that period. For example, assume the current period for revenue calculation is period 5. You enter adjusting timesheets into period 3 for corrections to costs incurred in period 3. Financial Statements for period 3 are final, and are not rerun for this period. When revenue for period 5 is calculated, allowable costs and fee are recognized as current period revenue for period 5 along with revenue on the adjusted timesheets from period 3. In the Project Summary Table, revenue for period 3 does not change. When you post the revenue, revenue for all periods of the current fiscal year up to and including the period selected is summarized in the Project Summary table. In the GL_POST_SUM table, revenue account balances are summarized for all periods of the current fiscal year up to and including the period selected. The difference is posted to the current period in GL_POST_SUM. Therefore, on a period-by-period basis, revenue amounts in GL_POST_SUM may not equal revenue per the Project Summary table. The amounts tie on a YTD basis, however.