Daily, or even more often, you may have to divide costs or income between multiple people or categories. However, simply dividing the amount into equal parts doesn't always get the job done. Instead, calculating pro rata amounts proportionally allocates the amounts between the different categories. That way, the allocations are more accurate and tell you what you need to know.
Pro Rata Formula
To calculate a pro rata share, you must know the amount you want to calculate the pro rata amount of and the criteria you are using to calculate it. The criteria could any number of things, including ownership shares, days or hours worked during a pay period, or miles driven for a specific purpose. Divide the portion you want to calculate by the total, and then multiply the resulting decimal by the amount you want to calculate the pro rata share of.
For example, if you are in business with three of your friends and one of them only contributes part-time, that friend only has 10 shares of the company. You and your two other friends each have 30 shares. When the company makes $20,000, you need to divide your profit among the owners based on your ownership interests. To calculate your share, divide your 30 shares by the 100 total shares to get 0.3. Then, multiply 0.3 by $20,000 to find you get to keep $6,000 of the profits.
Video of the Day
Uses for Calculating Pro Rata Amounts
You may also need to figure pro rata amounts in your personal life, such as if you are allocating a vehicle. For example, say that you drive your car for both business and personal reasons; for tax purposes, you need to allocate your expenses between business and personal time. Imagine that your total expenses for the year are $3,500 and you drive 25,000 miles. When you check your records, you see that 10,000 are personal miles and 15,000 are business miles. To calculate the portion you can deduct for business purposes, divide the 15,000 — the number of business miles — by 25,000, or the total miles, to get 0.6. Then, multiply 0.6 by $3,500 to find $2,100 of your vehicle costs are business related.
As another example, if you are renting out a room in your house and your tenant moves in in the middle of a month, you need to prorate the rent for the first month. If a full month's rent is $800 and your tenant only spends 12 of 30 days during the first month living with you, divide 12 by 30 to get 0.4. Then, multiply 0.4 by $800 to find your tenant owes you a prorated rent of $320.