Create an Overhead Method to Calculate Overhead Based on a Rate Applied to Operational Measures

For a rate based overhead method, you can enter a single rate to use for the overhead calculation or you can enter multiple rates in a sliding scale. You can also set up this type of overhead method to calculate overhead based on these time frames:

For a particular period.
From the beginning of a fiscal year or calendar year to a period.
From the inception date of a joint venture to a period.

Navigate to Setup and Maintenance and select the Joint Venture Management functional area under the Financials offering.
Click the Manage Joint Venture Overhead Methods task.
On Joint Venture Overhead Methods, click Add.
In the Details area, enter a name and description for the overhead method and then select the joint venture to associate the overhead method to.
In the Start Date and End Date fields, enter an effective date range for the overhead method.

When you schedule the process to calculate overhead, you enter an effective date that coincides with the date range in the overhead method. This determines which overhead method is used to calculate the overhead amount.
Click the Type drop-down list and select Rate based.
For the status, the default is Editing. When you are ready to use the overhead method to calculate overhead, you must change the status to Active.
Select either an ownership definition or a direct billed stakeholder for the distribution of overhead amounts:
- Ownership Definition. Select from a list of ownership definitions associated with the joint venture selected above.
  
  Caution: Most ownership definitions include an ownership percentage for the managing partner. A managing partner isn't typically invoiced for overhead, but recoups overhead costs. Therefore, you might need to create a new ownership definition specifically for distributing overhead amounts only to stakeholders other than the managing partner.
- Direct Billed Stakeholder. Select from a list of active stakeholders associated with the joint venture selected above. Use this option to distribute the entire overhead amount to a single stakeholder.
In the Calculation area, note that the Basis Source field is populated with Operational measures by default.
Click Select Measure Types and then add rows to enter measure types.
The Measure Types drop-down list displays only the measure types that are set up with the “number” value type in the Operational Measure Types work area.
Enter a rate to use for the overhead calculation, or select Use Sliding Scale to enter rates in a sliding scale.

Note: A rate can have up to 6 decimal places. A rate with more than 6 decimal places isn't rounded and will be truncated, for example 10.123456789 will be truncated to 10.123456.

By default, the primary ledger currency is applied to the rate.
If you selected to use a sliding scale, click Edit Sliding Scale and then add rows to enter measure amount thresholds and their respective rates.
When processing overhead, if the total measure amount is lower or equal to the lowest threshold, the process uses the rate associated with the lowest threshold for the calculation. For each increasing threshold limit, the measure amount between the lower threshold and next higher threshold is calculated with the rate associated with the higher threshold. If there’s a remaining measure amount that’s over the highest threshold, the remaining amount isn't included in the overhead calculation.
For the Period Basis, select one of these options:
- Inception to period. Select to base overhead calculations on operational measures recorded from the inception of the joint venture to the period specified in the process to calculate overhead.
- Period. Select to base overhead calculations on operational measures recorded in the period specified in the process to calculate overhead.
- Year to period. Select to base overhead calculations on operational measures recorded from the beginning of the year to the period specified in the process to calculate overhead.
For the Calendar, specify whether to calculate overhead based on your fiscal calendar or the standard calendar (January - December).
This helps to ensure that the appropriate operational measures are selected.
When calculating overhead from operational measures based on a rate, in addition to a minimum amount, you can enter a maximum amount of overhead to bill joint venture partners:
1. Minimum Amount. You can enter a minimum amount to be billed to joint venture partners if the calculated amount is less than this amount.
2. Maximum Amount. You can enter a maximum overhead amount to be billed to joint venture partners. The process to calculate overhead keeps a running total of overhead amounts calculated over the period basis selected in the overhead method. Overhead amounts that exceed the maximum amount will not be billed.
In the Invoice area, complete the following fields to set up invoicing for overhead amounts:
- Partner Account. Identify the offset account for the accounted overhead amount in Oracle Receivables.
  
  Place your cursor over this field to display the available segment values, and then select the combination of segment values that make up the account ID. Or click the search icon in this field and user filters to identify the segment values.
- Distribution Type. Select “Overhead” or “Fees and other charges.”
  
  This value is passed into overhead invoices as the line type and is used for account mapping to assign the partner account to the invoice line.
- Transaction Description. Enter a description to include in the transactions created for the invoiced overhead amounts.
  
  For example, if the overhead amount was calculated from a rate applied to the water usage, you could enter “Overhead for water usage” for the transaction description. The description appears in all invoices created for the distributed overhead amounts.