MPM applies burdens against a resource in the same order as they are listed in the template. This means the order of the burden codes affects the result.
In the example that follows, we create a burden template for an engineering resource using a basic rate of $10.00 (prime dollars) and the burden template described below.
Assume the burden template has the following entries:
Burden Code |
Description |
Rate |
OH1 |
Overhead #1 |
150% |
G&A |
General & Administrative |
15% |
COM1 |
Cost of Money #1 |
3% |
FEE1 |
Fee #1 |
10% |
Based on the order of the burden codes in the template, MPM performs the following calculations. Basic formulas are displayed in bold type.
Step |
Calculation |
1 |
Resource rate x Hours = Prime (given at $10.00) Overhead rate x Prime = Overhead (given at 150%) Prime + (Overhead) = Total Burdened Prime + (Overhead rate x Prime) = Total Burdened $10.00 + (150% x $10) = $25 |
2 |
G&A rate x Total Burden = G&A (given at 15%) Total Burdened + (G&A) = Total Cost Total Burdened + (G&A rate x Total Burdened ) = Total Cost $25 + (15% x $25) = $28.75 |
3 |
COM rate x Total Cost = COM (given at 3%) Total Cost + (COM) = Total Dollars Total Cost + (COM rate x Total Cost) = Total Dollars $28.75 + (3% x $28.75) = $29.61 |
4 |
Fee rate x Total Cost = Fee (given at 10%) Total Dollars + (Fee) = Total Price Total Dollars + (Fee rate x Total Cost) = Total Price $29.61 + (10% x $28.75) = $32.49 |
Terms |
Description |
Standard Hour |
Industrial Engineering Standard Hour |
Hour |
Equivalent terms — resource hour, man hour |
Prime dollars |
The direct cost of each resource. Equivalent terms — direct dollars, prime + personal burden, direct + related payroll expense. (Resource rate x Hours) |
Overhead dollars |
Costs incurred in the operation of a business that cannot be directly related to the individual products or services being produced. |
Gen & Admin |
Expenses incurred in the management and administration of a company and allocated in whole or in part to a contract. |
Total Burdened dollars |
Prime dollars + Overhead dollars. Equivalent terms: G&A base amount, inventory cost. |
Total Cost dollars |
Total Burdened dollars + G&A dollars. |
COM (Cost of Money) |
A form of indirect cost incurred by investing capital in facilities employed on government contracts. |
Total Dollars |
Total Cost dollars + Cost of Money dollars. |
Fee |
A payment for professional service. |
Total Price |
Total Dollars + fee. |