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    How are G&A, Fringe, Overhead and Fee calculated? Are the associated percentages multiplied by the only the direct labor increase or compounded on each increase and totalled?


    Answer

    When applying overhead, G&A , fringe, or profit or fee to direct labor, the "associated percentages"  are added to each category and totaled. Lets take a look at the following example of a fully burdened rate on a contractors salary.


    Direct Labor                 $52.50                             (Cont Salary)
    OVH Rate  50%           $52.50 * 50% =  $26.25     
    G&A 15%                     ($52.50 + $26.25) *.15 = $11.82    
    Profit Margin 12%        ($52.50 + $26.25 + $11.82) *.12 = $10.86

    The amount charged to the government is $101.43, which is known as the "wrap rate" or "blended rate".    ($52.50 + $26.25 + $1182 + 10.86)
    That rate is different than the Total Markup Rate of 193.20%  which is the total of all overhead rates burdened on the base labor rate. 

    We applied  50% OH, 15% G&A, and 12% Profit. When we combine them (1.5)(1.15)(1.12) =1.932, that is the Total Markup rate on the $52.50.  ($52.50 * 1.932 = $101.43)

    For more information on teh application of overhead rates, see VOL 3, Chapter 9 of the Contract ricing Reference Guide at https://www.dau.edu/tools/p/cprg

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