In the Eichleay formula, which step calculates the overhead per day?

In the Eichleay formula, which step calculates the overhead per day?

• A. Contract billings of disputed contract / Total billings during the contract period
• B. OH% x Total OH during contract period
• C. Allocated OH / Days of contract performance
• D. Total OH / Days of contract performance

Answer: (C)

The overhead per day in the Eichleay formula is found by taking the overhead allocated to the contract and dividing it by the number of days the contract was in performance. First you determine Allocated OH, which is OH% times Total OH during the contract period. Then you divide that Allocated OH by the Days of contract performance to get the daily overhead rate. This daily rate is what you apply to idle days to measure unabsorbed overhead for delay claims. The other options don’t yield a daily rate: one option computes the portion of total overhead assigned to the contract, another links overhead to contract billings, and the last would use total overhead rather than the allocated portion to derive a per-day amount.

The overhead per day in the Eichleay formula is found by taking the overhead allocated to the contract and dividing it by the number of days the contract was in performance. First you determine Allocated OH, which is OH% times Total OH during the contract period. Then you divide that Allocated OH by the Days of contract performance to get the daily overhead rate. This daily rate is what you apply to idle days to measure unabsorbed overhead for delay claims. The other options don’t yield a daily rate: one option computes the portion of total overhead assigned to the contract, another links overhead to contract billings, and the last would use total overhead rather than the allocated portion to derive a per-day amount.