blog posts System Government Costing Monthly Facts and Reminders Sep 21, 2022 8:30 amBuying and ContractsAccounting and BudgetingFY 23Why Usage Base Matters What is the Usage Base? Usage base is the total units of goods or services provided annually to all customers. Usage base is a measurable unit which allocates costs equally among all customers. The usage base selected must represent the cost/benefit each customer receives. A service activity may have different base units for the different lines of service or types of products offered to customers. To determine your base unit, consider how you charge customers for each service. Whether per hour, per sample, per square foot, etc. How usage base affects the rate calculation Usage base is the largest single factor that determines whether a service recovers its costs and breaks even over time. Put simply, a rate calculation is: Total cost to operate a service activity ÷ usage Base = calculated rate per unit. Non-Billable Units All units or services sold, whether to internal or external users, must be included in the base even if provided free of charge. When determining usage base, consider if there are units that benefit all customers and are not related to specific customers. Non-billable units should not be included in the usage base total. For example, if the service provides equipment testing per sample, then samples consumed in quality control testing would not be billable to a specific customer and therefore should not be included in the base total. Or the equipment may require monthly maintenance to be performed which does not benefit a specific customer and therefore should not be included in the base total. Tracking Usage and Time Period The time period used for usage base should match the time period of the related financial data used in the rate calculation. Usually, the most recently completed fiscal year. Service activities are required to track and maintain documentation of actual usage in order to compute compliant service rates. Detailed base documentation includes, at a minimum: Date the service was provided The number of units provided The customer who received the service CFOP information If you have questions about tracking base usage or calculating compliant rates feel free to consult System Government Costing’s Who to Ask list to find an expert who can help.