Create an Overhead Method to Calculate Overhead Using a Percentage of Costs from Indirect, General Operating Expenses

Set up an overhead method to use general ledger and subledger transactions as the basis of the overhead calculation, with an option to use a sliding scale. You can specify an overhead method percentage or use a sliding scale for the overhead method, but not both.

For this type of overhead method, you can enter a single percentage to use for the overhead calculation or you can set up a sliding scale with different percentages. 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 Percentage of cost.
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 is not 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, for the Basis Source, select General ledger and subledger transactions.
Enter a percentage to use for the overhead calculation, or if you want to enter percentages in a sliding scale, select Use Sliding Scale.

Note: A percentage can have up to 6 decimal places. A percentage with more than 6 decimal places is not rounded and will be truncated, for example 10.123456789% will be truncated to 10.123456.
If you selected to use a sliding scale, click Edit Sliding Scale and then add rows to enter threshold amounts and their respective percentages.
Cost amounts that are higher than the highest threshold amount will not be included in the overhead calculation. If cost amounts are lower than the first threshold amount, no overhead will be calculated.
For the Period Basis, select one of these options:
- Inception to period. Select to base overhead calculations on transactions from the inception of the joint venture to the period specified in the process to calculate overhead.
- Period. Select to base overhead calculations on transactions in the period specified in the process to calculate overhead.
- Year to period. Select to base overhead calculations on transactions from the beginning of the year to the period specified in the process to calculate overhead.
For the Calendar, select Fiscal or Standard to specify if overhead is to be calculated based upon your fiscal calendar or the standard calendar (January - December).
This helps to ensure that the appropriate transactions are selected.
When calculating overhead from general ledger and subledger transactions, in addition to a minimum amount, you can enter a maximum amount of overhead to bill joint venture partners:
- Minimum Amount. You can enter a minimum amount to include in the transaction if the calculated amount is less than this amount.
- 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.
To identify the source of the transactions for the overhead calculation, use the following transaction source fields or an account set:

To use the transaction source fields:
1. Select a ledger from the Transaction Source Ledger list. You can narrow the list to choose from by typing in the first few characters of the ledger name.
2. Click the Transaction Source Account field and then choose from a list of segment values that make up the account ID. Or click the "Search for combination" icon and use segment filters to identify the account ID.
  The following image shows a transaction source account and how the application displays the name and description of each of the segment values that make up the account ID, which in this example is 31-1006-17400-11-0001.
To use an account set, select an account set from the Account Set list.

An account set, which you set up separately, contains filter criteria for identifying transactions for processing in Oracle Joint Venture Management. See Overview of Joint Venture Account Sets for more information.
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 percentage of material costs, you could enter “Overhead for material costs” for the transaction description. The description appears in all invoices created for the distributed overhead amounts.