Revenue Recognition and Billing Calculations for CP/FP

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TechKnowledge Content

Question:
How is Revenue Recognition and Billing calculated for Fixed Price and Cost Plus projects?

Answer:



Forecast





Actual






unit cost

Qty

total cost

baseline rev

baseline actual

unit cost

Overhead

Qty

total cost

Project 1












Cost Cat 1

100

10

1000

100

2000

43.27

30

1

73.27


Cost Cat 2

100

10

1000

100

2000

43.27

30

1

73.27























Project 2












Cost Cat 1

100

10

1000

100

2000

43.27

30

1

73.27


Cost Cat 2

100

10

1000

100

2000

43.27

30

1

73.27












For an uncombined Cost to Cost Project:

Actual Total Cost/ Forecast Total Cost = Cost % Completed

73.27/1000=7.33%

**7.33%*2000=$146.60

For a combined Cost to Cost Project:

Actual Total Cost for this budget item/ Forecast Total Cost for all Cost Categories on the project = Cost % Completed

73.27/4000=1.83%

**1.83%*8000=$146.60

For a combined Cost to Cost Project and Contract:

Actual Total Cost for this budget item/ Forecast total cost for all Cost Categories on the contract =Cost % Completed

73.27/4000=1.83%

**1.83%*8000 =$146.60

For an Uncombined Effort Expended Project:

Actual Total Quantity/Forecast Total Quantity= % Quantity Completed

1/10 =10%

** 10% *2000=$200

For a Combined Effort Expended Project:

Actual Total Quantity for this budget item/ Forecast Total Quantity for all Cost Categories = % Quantity Completed

1/20= 5%

** 5%*4000=$200

For a Combined Effort Expended Project and Contract:

Actual Total Quantity for this Budget Item/ Forecast Total Quantity for all Cost Categories on the Contract

1/40=2.5%

**2.5%*8000=$200

** Once the percentages are determined they are then multiplied by the forecast billing amount to determine a ‘recommended’ billing amount or revenue recognition amount.





This article was TechKnowledge Document ID: 24694

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