2 DEFINITIONS
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Direct Labour Cost — Labour cost which can be identified with and allocated to the provision of a service or goods. The cost components are basic wage/salary rate, shift premiums, fringe benefits and overtime premiums. Fringe benefits are the employer contributions to employee benefit plans, i.e., Superannuation, Canada Pension Plan, Quebec Pension Plan, Supplementary Death Benefits, Unemployment Insurance, Medical and Surgical Insurance and Hospital Insurance.
These components will be calculated on a yearly basis by individual. This total annual labour cost will then be divided by the number of available hours in a year. The available hours in one year are 1650 hours or 220 days (365 days per year less weekends (104), less statutory holidays (11), less annual leave (15), less sick leave (15), times 7.5 hours per day) unless otherwise specified in a collective agreement.
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Equipment — Equipment cost includes depreciation (including the cost of capital), maintenance, and space where the usage of space for equipment is significant. Maintenance cost on equipment includes labour, material and direct maintenance expense where these costs are identifiable.
Having calculated the yearly cost for depreciation, maintenance and space, these costs will be added together, then divided by the estimated number of hours the equipment will be used during the year to arrive at an hourly rate.
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Government of Canada — As an accounting entity is defined in the Public Accounts, 1977, Volume 1, 1.3, as the aggregate of all its departments, agencies, boards, commissions, councils, Crown corporations, funds and other bodies, with two exceptions. These exceptions are the “Agencies” and “Proprietary”, Crown corporations listed respectively in Schedules C and D of the Financial Administration Act and those Crown corporations that are not subject to the Financial Administration Act.
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Indirect Costs — These are the overhead costs of the Department and the Government of Canada. Overhead can be further defined as operating costs which cannot be directly allocated to a service or goods but can be allocated to the service or goods through some intervening basis of allocation such as direct labour cost.
These costs would include statutory expenses plus those costs relating to the Departmental Budget for Administration as per the Main Estimates plus sector overhead plus services provided without charge by other government departments less formula indirect overhead recoveries from the Department of National Defence.
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Maintenance — Maintenance costs on equipment include the labour costs of the individuals employed for the express purpose of maintaining the equipment. The amount of yearly maintenance labour to be charged against a given piece of equipment should be pro-rated based on the expected time spent during a one year period. The other two cost components of equipment maintenance are materials and direct expense. Material cost would be such items as the cost of replacement parts for a piece of equipment while an example of direct expense is maintenance contracts. Both these cost components should be estimated for a one-year period.
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