How to Determine Nonlabor Cost Rates

Project Financial Management applications use cost rates to calculate the raw cost for transactions. For example, for cost transactions, the application determines a cost rate for each transaction and calculates the raw cost during transaction costing, unless you import the raw cost for transactions.

How Nonlabor Cost Rates Are Determined

The application uses organization costing rules to determine the nonlabor cost rate schedule. Costing rules can be associated with an organization or with a combination of organization and business unit. If hierarchies are used, costing rules can be associated with organizations at any level of the expenditure organization hierarchy.

The application searches for a costing rule in the following order and stops when it finds a valid costing rule that includes the transaction date.

1. Project expenditure organization and business unit

2. Project expenditure organization

3. Parent organization and business unit

4. Parent organization

The application continues up the hierarchy looking at each parent organization and business unit. If an organization isn't found after traversing the hierarchy, the costing rule associated with the business unit is used.