How Burden Costs Are Calculated

Burdening provides the aggregate of raw and burden costs to represent the total cost of doing business accurately. You can calculate burdened costs as a markup of costs by using a precedence of multipliers.

The application performs a summation of burden costs with raw costs to provide a true representation of costs. Using burdening, you can perform internal costing, revenue accrual, billing, asset capitalization, and budgetary control including the type of burden costs that your company applies to raw costs.

Settings That Affect Burden Cost Calculation Processing

You define the projects that need to be burdened by enabling project types for burdening. When you specify that a project type is burdened, you must then specify the burden schedule to be used. The burden schedule stores the burden multipliers and indicates the transactions to be burdened, based on cost bases defined in the burden structure. You specify the expenditure types that are included in each cost base. With burdening, you can use an unlimited number of burden cost codes, easily revise burden schedules, and retroactively adjust multipliers. You can define different burden schedules for costing, revenue, and billing purposes.

If you enable the option to create separate expenditure items for burden costs at the project type level and the transaction is eligible for budgetary control, then you must associate an expenditure type to the burden cost code in the cost bases of the burden structure.

How Burden Costs Are Calculated

The following graphic shows the decision points and process for calculating burdened costs.

1. The application selects the expenditure items with raw cost amounts for processing.

2. The process determines if the related project type of the expenditure item is enabled for burdening.

3. If the project type is enabled for burdening, then the process determines the burden schedule to be used.

4. If the project type is not enabled for burdening, then the expenditure item is not burdened. The process assumes the burden multiplier is zero; therefore, burden cost is zero and thus burdened cost equals raw cost.

5. To determine which burden multiplier to use, the process determines if there is a burden schedule override for the expenditure.

6. If a burden schedule override exists, then the process uses the task burden schedule override on the associated task. For sponsored projects, the process ignores the task burden schedule overrides.

7. If no task burden schedule override exists on the associated task, then the process uses the project burden schedule override on the associated project. For sponsored projects, the process ignores the project burden schedule overrides.

8. If there are no burden schedule overrides, the process uses the burden schedule assigned at the task level for burden cost calculations.

   For sponsored projects, the process determines the burden schedule to use for burden cost calculations in the following order:

   1. Burden schedule assigned at the summary task level of the award project

   2. Burden schedule assigned at the award project level

   3. Burden schedule assigned at the award level

9. If the burden schedule type is a firm schedule, then the process checks if a fixed date is specified for burdening. If yes, it uses the fixed date to determine the schedule version. If a fixed date isn't specified, then the process uses the expenditure item to determine the burden schedule version.

10. After a schedule version is determined, the process verifies that the expenditure type of the expenditure item is found in any of the cost bases of the selected burden schedule version.

11. If an expenditure type is excluded from all cost bases in the burden structure, then the expenditure items that use that expenditure type aren't burdened (burden cost equals zero, thus burdened cost equals raw cost).

12. The process then checks if burden multipliers exist for the organization to which the cost transaction belongs. If burden multipliers aren't defined for the organization, then the process checks if multipliers are defined for any of the parent organizations in the hierarchy. If burden multipliers don't exist for the organization or any of the parent organizations, then the expenditure isn't burdened.

13. The application calculates burden cost and burdened cost amounts according to the following calculation formulas:

    • For additive burden structures, burden cost equals raw cost multiplied by a burden multiplier.

      burden cost = raw cost * burden multiplier

    • For precedence burden structures, burden cost equals the sum of raw cost and preceding burden costs multiplied by a burden multiplier.

      burden cost = (raw cost + preceding burden cost) * burden multiplier

    • Burdened cost equals the sum of raw cost and burden costs.

      burdened cost = raw cost + burden cost

Burdened Cost Calculation

The burden structure assigned to the burden schedule version determines whether calculations are additive or based on the precedence assigned to each cost code. A burden structure can be additive or precedence based.

If you have multiple burden cost codes, an additive burden structure applies each burden cost code to the raw costs in the appropriate cost base. The examples in the following tables illustrate how burdened cost is calculated as a combination of raw and burden costs and how different burden structures using the same cost codes can result in different total burdened costs.

The following table lists the cost codes and multipliers for calculating burdened cost using the additive burden structure.

Cost Code	Precedence	Multiplier
Overhead	1	0.10
Material Handling	1	0.10
General Administrative Costs	1	0.10

The following table describes an example of calculating the burdened cost using the additive burden structure for an expenditure item that is not rate based.

Cost Type	Calculation	Amount
Raw Cost	Not Applicable	1000.00
Overhead	1000.00 * 0.10	100.00
Material Handling	1000.00 * 0.10	100.00
General Administrative Costs	1000.00 * 0.10	100.00
Burdened Cost	1000.00 + 100.00 + 100.00 + 100.00	1300.00

A precedence burden structure is cumulative and applies each cost code to the running total of the raw costs, burdened with all previous cost codes. The calculation applies the multiplier for the cost code with the lowest precedence number to the raw cost amount.

The calculation applies the cost code with the next lowest precedence to the subtotal of the raw cost plus the burden cost for the first multiplier. The calculation logic continues in the same way through the remaining cost codes. If two cost codes have the same precedence number, then both are applied to the same subtotal amount.

The following table lists the cost codes and multipliers for calculating burdened cost using the precedence burden structure.

Cost Code	Precedence	Multiplier
Overhead	10	0.10
Material Handling	20	0.10
General Administrative Costs	30	0.10

The following table describes an example of calculating the burdened cost using the precedence burden structure for an expenditure item that is not rate based.

Cost Type	Calculation	Amount
Raw Cost	Not Applicable	1000.00
Overhead	1000.00 * 0.10	100.00
Material Handling	(1000.00 + 100.00) * 0.10	110.00
General Administrative Costs	(1000.00 + 100.00 + 110.00) * 0.10	121.00
Burdened Cost	1000.00 + 100.00 + 110.00 + 121.00	1331.00

The order of the burden cost codes has no effect on the total burdened cost with either additive or precedence burden structures.