Operating Status
FULLY OPERATIONAL
OPERATING STATUS
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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