Overhead Rates

Direct and indirect overhead rates are determined in one of two ways:

• Computed using a group of formulas. aPriori calculates an annual work center budget and translates it into an hourly rate based on the planned number of earned machine hours for the work center. This method is used if the Digital Factory variable Use Computed Overhead Rate is set to true (as it is in aPriori starting point Digital Factories).

• Taken directly from the machine property Direct Overhead Rate (adjusted by the factor specified by the cost model variable overheadRateAdjustmentFactor) or Indirect Overhead Rate. This method is used if the Digital Factory variable Use Computed Overhead Rate is set to false. (Note that if you have already overridden some overhead-related values before you set this Digital Factory variable to false--or change to a Digital Factory that sets it to false--Show Formula Dependencies may display overhead formulas that are no longer relevant. See the aPriori User Guide for more information.)

Computed direct and indirect overhead rates are based on annual overhead costs and annual earned machine hours:

Direct Overhead Rate = Direct Overhead Cost / Annual Earned Machine Hours

Indirect Overhead Rate = Indirect Overhead Cost / Annual Earned Machine Hours

These values are adjusted by the factor specified by the cost model variable overheadRateAdjustmentFactor.

Annual earned machine hours is the number of expected machine uptime hours annually:

Annual Earned Machine Hours = Work Center Capacity * Machine Uptime Percent

Work Center Capacity = Hours per Shift * Number of Shifts * Working Days per Year

Hours per shift (specified by the Digital Factory variable Hours Per Shift)

Number of shifts (specified by the Digital Factory variable Number Of Shifts)

Working days per year (specified by the Digital Factory variable Working Days Per Year)

Machine Uptime Percent (specified by the machine property Machine Uptime Percent)

Annual overhead cost calculations are described in Annual Direct Overhead and Annual Indirect Overhead.