3. COST ACCOUNTING AND RATE DETERMINATION › 3.7 Determining Billable Rates

3.7 Determining Billable Rates

You can use the following steps to determine billable rates
for each data processing service.  Determining the operation
costs for each load center should precede any rate
determination.
 
1.  Identify the unit element within each direct load center
    for which the user will be charged (for example, for the
    tape library load center, the unit element to be charged
    would be the storage of a tape reel per day, say $0.05
    per reel/day).
 
2.  Select the type of chargeback approach that should be
    used.  The three primary methods are profit, break-even
    and capacity chargeback.
 
3.  Determine the fiscal time period that will be used for
    the current set of rates being developed.  We strongly
    suggest that you use at least one quarter, or if
    possible, six months or one year.
 
4.  Project either the estimated utilization level or the
    capacity level, depending upon the chargeback method you
    choose.  Approximate the utilization level by reviewing
    the historical usage and then relating that pattern to
    the projected workload growth or change.  For capacity
    charging, derive the figure that represents the capacity
    level for this load center service.  The capacity level
    must be represented in terms of the unit elements defined
    in step 1.  (For example, for the tape library there may
    be 300,000 storage units with each unit representing the
    storage of one reel of tape for one day.)
 
5.  For the period selected, determine the load center cost
    to be recovered.
 
6.  Calculate the unit rates for each of the data processing
    services being offered.
 
In summary, two points must be stressed:  first, understand
what the actual costs are; and second, establish an equitable
means for distributing those costs.