SECTIONS
Revenue Management automatically allocates a revenue contract's Total Revenue value to its performance obligations in proportion to each obligation's standalone selling price (SSP). This is illustrated in the examples below, starting with a straightforward allocation in Example 1.
You can override a performance obligation's SSP and Allocated Revenue amount. This will affect how revenue is allocated across the contract as illustrated in Examples 3 and 4.
Example 1: A simple allocation
This contract has three performance obligations (A, B and C). The contract's Total Revenue is 120. The Total SSP of the performance obligations is 150.
|
PO |
Revenue |
SSP |
Allocated Revenue |
|---|---|---|---|
| A | 35 | 50 | 40 |
| B | 20 | 25 | 20 |
| C | 65 | 75 | 60 |
| Totals | 120 | 150 | 120 |
A's SSP (50) is one third of the total SSP (150) so it is allocated one third of the total revenue (120): 40
B's SSP (25) is one sixth of the total SSP (150) so it is allocated one sixth of the total revenue (120): 20
C's SSP (75) is half of the total SSP (150) so it is allocated half of the total revenue (120): 60
Example 2: Where one item is given away free of charge
This contract has three performance obligations (A, B and C). The contract's Total Revenue is 30 but C earns no revenue because it is given away free of charge. The Total SSP of the performance obligations is 40.
|
PO |
Revenue |
SSP |
Allocated Revenue |
|---|---|---|---|
| A | 20 | 20 | 15 |
| B | 10 | 10 | 7.5 |
| C | 0 | 10 | 7.5 |
| Totals | 30 | 40 | 30 |
A's SSP (20) is half of the total SSP (40) so it is allocated half of the total revenue (30): 15
B's SSP (10) is one quarter of the total SSP (40) so it is allocated one quarter of the total revenue (30): 7.5
C's SSP (10) is one quarter of the total SSP (40) so it is allocated one quarter of the total revenue (30): 7.5
Example 3: Where one item's SSP has been overridden
You can optionally set a different SSP from the value derived from the source record.
This contract has four performance obligations (A, B, C and D). The contract's Total Revenue is 180. The SSP for D has been overridden (reduced from 60 to 50) so the total SSP to use is 200.
|
PO |
Revenue |
SSP |
SSP Override |
SSP to use |
Allocated Revenue |
|---|---|---|---|---|---|
| A | 35 | 50 | 50 | 45.00 | |
| B | 60 | 55 | 55 | 49.50 | |
| C | 35 | 45 | 45 | 40.50 | |
| D | 50 | 60 | 50 | 50 | 45.00 |
| Totals | 180 | 210 | 200 | 180 |
A's SSP (50) is 25% of the total SSP to use (200) so it is allocated 25% of the total revenue (180): 45
B's SSP (55) is 27.5% of the total SSP to use (200) so it is allocated 27.5% of the total revenue (180): 49.50
C's SSP (45) is 22.5% of the total SSP to use (200) so it is allocated 22.5% of the total revenue (180): 40.50
D's overridden SSP (50) is 25% of the total SSP to use (200) so it is allocated 25% of the total revenue (180): 45
Example 4: Where one item's Allocated Revenue has been overridden
You can optionally set the allocated revenue value for a performance obligation. The remaining revenue will then be allocated across the remaining performance obligations.
This contract has three performance obligations (A, B and C). The contract's Total Revenue is 100 but the allocated revenue amount for A has been overridden.
|
PO |
Revenue |
SSP |
Allocated Revenue Override |
SSP of POs with values to allocate |
Allocated Revenue |
|---|---|---|---|---|---|
| A | 15 | 40 | 40 | 40 | |
| B | 50 | 55 | 55 | 33 | |
| C | 35 | 45 | 45 | 27 | |
| Totals | 100 | 140 | 100 | 100 |
You have overridden the allocated revenue amount for A to 40. This means that of the total revenue (100) there is only 60 remaining for allocation to B and C.
B's SSP (55) is 55% of the total SSP of POs with values to allocate (100) so it is allocated 55% of the remaining total revenue (60): 33
C's SSP (45) is 45% of the total SSP of POs with values to allocate (100) so it is allocated 45% of the remaining total revenue (60): 27