Definition

Service centers need to estimate usage for the upcoming year in order to calculate their rates.

Annual Rate = Annual Costs / Total Annual Usage

Including in Rate Proposal

The unit of usage charged to users should be reasonable for the type of services provided.

All usage should be tracked and factored into rate calculation, even if the services are provided without charge.

In order to estimate usage, use prior year(s) numbers as a starting point and adjust for expected changes. Centers without sufficient usage history can use available units as a starting point and adjust for downtime and other intervening factors.

When charging on an hourly basis, the total maximum hours available for a full time employee is 2080 per year. This would be the starting point and adjusted downward for vacation, sick leave, downtime, etc. The following examples illustrate the calculation of estimated usage with and without prior history.

Example 1: For the last two years, the usage for XYZ center has been 400 and 250 units. Last year, the machine was inoperable for 4 months and so, the usage from 2 years ago (400 units) is used. The usage was increased by approximately 10% to account for jobs on back order that weren't completed last year. Therefore, the center expects to sell approximately 440 units for the upcoming year.

Example 2: A consulting recharge center that was recently established charges users by the hour. They have one employee at 1.00 FTE working on the center. Available hours are used to calculate usage.

 

Maximum hours available 2080 40 hours/week x 52 weeks
Less: Holidays (88) 11 days paid x 8 hours/day
Less: Vacation & Sick (120) 10 hours/month x 12 months
Available Hours 1872  
Less: Non-productive hours
(downtime for machine setup, etc)
(390) 1.5 hrs/day x 5 days/wk x 52 wks
Expected Usage 1482 hours  

Whichever method is used to calculate usage, it is important to describe the methodology or formula used in the rate proposal.