Considerations for Selecting Planning Amount Allocation
When you set up summarization options, you're required to specify the planning amount allocation basis. You can select a planning amount allocation basis only if you have selected the budgets and forecast data source for summarization. The following are the methods of allocating planning amounts:
-
Period start date
-
Period end date
-
Daily proration
Assume that a project includes a task for team members to undergo some product and soft skills training. A budget of $5900 is allocated to this task between 1 January 2011 and 28 February 2011. While summarizing using a monthly accounting calendar, the application can allocate the planned amount in three ways.
Period Start Date Basis Method
Allocate the entire budget of $5900 to the first period of January 2011 regardless of when the training takes place. This allocation method could impact period to date cost variance measures for January and February if the actual training costs occur in February. The period start date basis method is the default option.
Period End Date Basis Method
Allocate the entire budget of $5900 to the last period of February 2011 regardless of when the training takes place. This allocation method could impact period to date cost variance measures for January and February if the actual training costs occur in January.
Daily Proration Basis Method
Distribute the budget of $5900 equally over the entire period so that $3100 is spent in January 2011 and $2800 is spent in February 2011. The following shows how the budget is distributed:
-
Allocate the total amount of $5900 and dividing it by the total number of days to arrive at the daily amount.
Total Number of Days = 31 + 28 = 59
Daily Amount = $5900 / 59 = $100
-
Multiply daily amount by the number of days the task is active.
Amount for January 2011 = $100 * 31 = $3100
Amount for February 2011 = $100 * 28 = $2800
Summarizing project performance data using daily proration requires more system resources than summarizing project performance data using the period start or end date basis. To distribute plan amounts evenly across plan duration, the application creates a summarized record for each day for the affected projects and tasks in the project unit.
Using the daily proration basis method reduces the chances of impacting period to date cost variance measures for January and February.