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Different Cost Rule Rates for Capital and Operating

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HP_Cfg
Frequent Contributor.

Different Cost Rule Rates for Capital and Operating

Is anyone aware of a way to different rates to labor based on whether the task/activity being performed is Capital or Operating? Activity (which drives capitalization) isn't one of the factors that can be made part of a Cost Rule, and so I'm stumped trying to accomplish this.

 

Any help would be greatly appreciated.

9 REPLIES
dirkf
Acclaimed Contributor.

Re: Different Cost Rule Rates for Capital and Operating

Hi HP_Cfg,

 

Cost rules, as far as I'm aware, are only relevant to operating costs which are caused by resources that have a cost rule assigned to their region, resource, role etc. Based on the hours that they work and the cost factoring, the labor costs (and forecast costs) are calculated.

I wouldn't know why or how to assign cost rules, prioritzed by cost factors, to a capital expense.

In my view it simply doesn't make sense but you might be able to elaborate a little.

 

However, as far as I can see it's not implemented.

 

Best regards,

dirk

HP_Cfg
Frequent Contributor.

Re: Different Cost Rule Rates for Capital and Operating

Thank you for the prompt response.

 

What I am suggesting does make sense, as costs within PPM Financial Management are allocated between Capital and Operating, with the Cost Rules applying to both. For actual costs this is done by designating Activities as either Capital or Operating, and by Assigning Activities to Tasks. When labor is charged to a Task, it is designated as either Capital or Operating based upon that criteria. When forecasting costs using a Staffing Profile, the Capital/Operating split is defined by Position, on the Advanced tab.

 

So far; so good.

 

Our difficulty arises from the fact that the accounting rule governing the capitalization of software (SOP 98-1) provides for the partial burdening of labor costs when those costs are capitalized. This burdening does not occur if the costs remain Operating. So we need to apply burdened labor rates when the costs will be capitalized, and unburdened rates when the costs are Operating. This necessitates having different Cost Rules and Rates based upon the Task to which a resource's time is charged.

 

I'm trying to determine if that is possible.

 

Thanks again...

dirkf
Acclaimed Contributor.

Re: Different Cost Rule Rates for Capital and Operating

Hi again HP_Cfg,

 

let me say it this way - 'activities' to me are operating costs, as I don't see capital costs fullfilling any activities. Equally, in my mind I don't see it as capital costs if someone has to labor - but then I'm from the more neoclassic approach of economics. Capital excepting interest to me is money and not anything do to with labor.

 

Notwithstanding the fact that I might be (and I would think it's possible without a doubt) mistaken on my assessment, I'm inclined to say - I don't have A CLUE.

 

You might want to raise a case about this with Support so we can get an answer to this from RnD.

Again though, my view is -> no!

 

I do hope you get your answer though. Maybe a customer or someone else here might know better than myself.

 

Sorry I wasn't able to help!

 

Best regards,

Dirk

 

 

HP_Cfg
Frequent Contributor.

Re: Different Cost Rule Rates for Capital and Operating

Yeah... economics and accounting don't always align.

 

I've sent an email to our HP rep and one of the Financial Management applications guys - we'll see what they say.

 

Thanks again!

--

Jim

dirkf
Acclaimed Contributor.

Re: Different Cost Rule Rates for Capital and Operating

Hey Jim,

 

if you get a chance, solve the with the answer here.

I'M interested beyond a doubt, so I want to know what the result is.

 

Where are located AMX?

 

Take care.

 

Best regards,

Dirk

kintanadan
Super Contributor.

Re: Different Cost Rule Rates for Capital and Operating

HP_Cfg

 

You could try adding a Capital Cost Line directly into the Financial Summary for this Labor Burden.

Of course, the actuals would need to be entered manually.

Typically, actual labor burdens average somewhere between 30-40%. (IMHO)

 

Regards

HP_Cfg
Frequent Contributor.

Re: Different Cost Rule Rates for Capital and Operating

Hi Dirk - not sure what you are asking with this?   "Where are located AMX?"

 

kintanadan:  We will likely do it the other way, and add a cost line backing out the burden for Operating Costs.

dirkf
Acclaimed Contributor.

Re: Different Cost Rule Rates for Capital and Operating

 

Sorry :-)

Swallowed words - should've read 'Where are you located - AMX (Americas region)?'

 

Best regards,

Dirk

HP_Cfg
Frequent Contributor.

Re: Different Cost Rule Rates for Capital and Operating

Ah - wasn't familiar with "AMX".

 

We have (Healthcare) facilities in the Western U.S., with IT based in Phoenix, but also San Francisco.