Earned Revenue Factor Method
Select this method to recognize revenue by multiplying cost with an earned revenue factor. The earned revenue factor can be manually entered or can be calculated. The calculated ERF is based on the contract amount and the aggregated bottom up budget.
When to use this method
This method can be used for projects that have the Contract Type set to Fixed Price and use cost reimbursement as a base to recognize revenue thus achieving a cost plus scenario within a fixed price contract.
Calculation of revenue recognized
Revenue Recognized = Cost for current period x Earned Revenue Factor
You can manually enter the earned revenue factor or click LN calculates the factor using the following formula:
to get the calculated value.ERF = Project Contract Amount/Total Budgeted Costs
Earned Revenue Factor can be recognized at these levels:
- Project
- Extension
- Element
- Activity
Constraints
To calculate ERF, the project status has to be Active, because the total budgeted cost calculated using the build cost control process is known only for active projects.