1. Joint Venture Management Implementation Guide
  2. Fixed Amount Method

Fixed Amount Method

Overhead amount can be a fixed amount per month as specified in the joint operating agreement. Not all the business units in the joint venture will be eligible to charge overhead. In such a case, the fixed overhead amount can be charged to those business units that are eligible to be charged.

The calculation depends on the effective dates of the operational statuses of the joint venture or the business unit during the calculation month that is specified in the R09J408 processing option. The operational statuses of the joint venture or business units can change multiple times in the calculation month. Therefore, all of the operational statuses in that month will be considered while calculating the overhead amount. If there are exceptions, the operational status can be specified as an exception operational status for that method. The chargeable month must be specified for the exception operational status to be effective. If the joint venture or business unit operational status is specified in the exception operational status for that method, overhead is charged only for the number of chargeable months specified in that method. If you do not want to use an operational status in overhead calculation, you must set up that operational status as an exception operational status with the chargeable months as zero.

After you calculate overhead, you cannot edit or change the operational status for the months for which the calculation exists for a business unit or a joint venture.

Consider the following example for a joint venture:

Example for Fixed Amount

The Fixed Amount method uses operational status of the joint venture.

  • Operational Status of the joint venture available in the F09J70 table:

    January 1st, 2018 through March 31st, 2018 = Drilling (100)

    April 1st, 2018 through April 30th, 2018 = Producing (170)

    May 1st till date = Shut-in

  • Exception Operational Status that is set up on the method:

    Drilling (100) = 2 chargeable months

    Producing (170) = 0 chargeable months

  • Base Amount = 150 USD

When you run the overhead calculation for month 01 (January) to 05 (May), the system retrieves the joint venture operational statuses for each month, and checks if these operational statuses are also specified as exception operational statuses on the method, and arrives at the overhead amount to be charged.

  • January = 100 USD

  • February = 100 USD

    The joint venture is at the operational status of Drilling in January till the end of March. The operational status Drilling is also set up on the method as an Exception Operational Status with chargeable months as 2. Therefore, the amount setup for the exception operational status is applied for January and February.

  • March = 0 USD

    Because the operational status Drilling is set up on the method as an Exception Operational Status with chargeable months as 2, overhead is not calculated for March.

  • April = 0 USD

    The joint venture is at the Producing status in April, and the Producing status is set up as an Exceptional Operational Status with chargeable months as 0.

  • May=150 USD (The base amount is applied.)

Fixed Amount Method

Overhead Calculation Using Fixed Amount Method

To calculate overhead amount using the Fixed Amount method, the system:

  1. Retrieves the base amount from the Overhead Detail table (F09J51) and calculates overhead based on the effective dates specified in the P09J50.

  2. Retrieves all of the operational statuses of the joint venture or business unit for the calculation month from the Joint Venture Status History (F09J70) or Business Unit Status History (F09J71) table.

  3. Considers any exception operational statuses for the joint venture or for the business units in the F09J52 table, and calculates overhead based on the chargeable months for the exception statuses specified in the overhead method.

    Note that if the operational status for the business unit or joint venture is not found, then the overhead will still be charged for the month if the inception date and effective date of the overhead method are applicable for the month.

  4. If the Effective From date or Effective Through date of the method results in calculation of a partial month, the system prorates the base amount when the overhead amount is calculated.

Using all of this information, the system calculates the overhead amount using this formula:

Overhead Amount = (Total Number of Active Days)/(Total Number of Days in the Month) x Fixed Amount