Spread Group Calculations
Genesis edition only.
Grouping items into a Spread Group means that their Sell Rate is calculated based on the totals from the grouped items. The difference between the calculated Sell Rate and the Direct Rate for the spread group is added to the direct rate of each individual item to produce its Sell Rate.
SPREAD GROUP EXAMPLE
A contract identifies three dump options for the cut which will be required: cut to spoil, cut to fill, and cut to stockpile. While it is known that the total volume of cut will be 100,000m³, the actual distribution of the three items is subject to variation.
Initial estimates are that 10,000m³ will be cut to Spoil, 10,000m³ will go to cut to fill, and the remaining 80,000m³ is cut to stockpile. With a standard markup of 20% calculated and applied to each item individually, any adjustment to these estimated quantities can cause the overhead costs and margin to be under-recovered, as illustrated below.
|
Item |
Qty (m3) |
Direct Rate |
Direct Total |
Rate + 20% Markup |
Sell Total |
Expected Recovery |
|---|---|---|---|---|---|---|
|
Cut to spoil |
10,000 |
$1 |
$10,000 |
$1.20 |
$12,000 |
$2,000 |
|
Cut to fill |
10,000 |
$5 |
$50,000 |
$6.00 |
$60,000 |
$10,000 |
|
Cut to stockpile |
80,000 |
$10 |
$800,000 |
$12.00 |
$960,000 |
$160,000 |
|
Total |
100,000 |
|
$860,000 |
|
$1,032,000 |
$172,000 |
After work has begun, the distribution is reassessed. While the overall total of cut is unchanged at 100,000m³, the distribution has been changed to 80,000m³ for cut to spoil, 10,000m³ for cut to fill, and 10,000m³ for cut to stockpile.
|
Item |
Qty (m3) |
Direct Rate |
Direct Total |
Rate + 20% Markup |
Sell Total |
Expected Recovery |
|---|---|---|---|---|---|---|
|
Cut to spoil |
80,000 |
$1 |
$80,000 |
$1.20 |
$96,000 |
$16,000 |
|
Cut to fill |
10,000 |
$5 |
$50,000 |
$6.00 |
$60,000 |
$10,000 |
|
Cut to stockpile |
10,000 |
$10 |
$100,000 |
$12.00 |
$120,000 |
$20,000 |
|
Total |
100,000 |
|
$230,000 |
|
$276,000 |
$46,000 |
As you can see, while the total amount of cut remains the same, the recovery would be reduced by $126,000.
When the three items are combined into a spread group, the group Direct Total ($860,000) is divided by the Quantity (100,000) to find a rate ($8.60). The markup is then calculated from this rate: 20% * $8.60 = $1.72 and is added to each item to determine its Sell Rate. As long as the Quantity of the group remains the same, altering the Quantity of the individual items will not change the Expected Recovery.
|
Item |
Qty (m3) |
Direct Rate |
Direct Total |
Rate + 20% Markup |
Sell Total |
Expected Recovery |
|---|---|---|---|---|---|---|
|
Cut to spoil |
10,000 |
$1 |
$10,000 |
$2.72 |
$27,200 |
$17,200 |
|
Cut to fill |
10,000 |
$5 |
$50,000 |
$6.72 |
$67,200 |
$17,200 |
|
Cut to stockpile |
80,000 |
$10 |
$800,000 |
$11.72 |
$937,600 |
$113,600 |
|
Total |
100,000 |
|
$860,000 |
|
$1,032,000 |
$172,000 |
Changing the quantities of individual items within the Spread Group does not affect the recovery.
|
Item |
Qty (m3) |
Direct Rate |
Direct Total |
Rate + 20% Markup |
Sell Total |
Expected Recovery |
|---|---|---|---|---|---|---|
|
Cut to spoil |
80,000 |
$1 |
$80,000 |
$2.72 |
$217,600 |
$137,600 |
|
Cut to fill |
10,000 |
$5 |
$50,000 |
$6.72 |
$67,200 |
$17,200 |
|
Cut to stockpile |
10,000 |
$10 |
$100,000 |
$11.72 |
$117,200 |
$17,200 |
|
Total |
100,000 |
|
$230,000 |
|
$402,000 |
$172,000 |