Overhead Calculation Using Fixed Amount with Escalation Method

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

1. Retrieves the base amount, base year, base month, and escalation index, and calculates overhead based on the effective dates specified in the Overhead Rule program (P09J50) for a method.

   If you do not run the R09J408 program to calculate overhead for the previous months, and then attempt to calculate the overhead using the Fixed Amount with Escalations method for the current month, the system internally escalates the amount from the last calculated month using the escalation index to arrive at the correct escalated overhead amount for the current calculation.

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

   Note that even if there is no operational status record for the joint venture or business unit for the calculation month, the overhead will still be charged for the month if the inception date of the joint venture and the effective date of the overhead method are applicable for the month.

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.

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

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

Escalation Amount = (Total Number of Active Days)/(Total Number of Days in the Month) x Escalated Amount