Define Allocation Rules to Allocate Labor Costs from a Shared Services Project

This example demonstrates how to set up allocation rules to allocate labor costs from a shared services project.

A central contract administration group supports billable projects in the company. Costs that the contract administration group incurs such as labor, expenses, and supplies are charged to a shared services contract administration project. Weekly, the costs are incrementally allocated to all billable projects in the organization. A major project is excluded from the allocation because due to the project's complexity, the project has its own contract administration team and does not use the central contract administration group. Therefore it is explicitly excluded in the targets. Costs are allocated incrementally throughout the year and prorated based on the total actual burdened cost charged.

You are implementing allocation rules for the organization. You want to allocate 100 percent of costs collected in the shared contract services project to all eligible tasks once a week. The costs are spread to all projects for the organization based on the total actual labor hours charged to each project, as more time is worked on the project. The following table summarizes key decisions for this scenario:

Decisions to Consider	In this Example
How to allocate the costs?	Allocate to all time and materials projects within the San Diego organization.
When to allocate costs?	Allocate labor costs incrementally on a weekly basis.
What costs to allocate?	Allocate 100 percent of the costs collected in the shared contract services project.

You define the allocation rule in this scenario to distribute labor cost amounts from shared services project. This allocation rule defines the following:

• Source of the amounts to allocate

• Target projects and tasks to receive the allocation

• Method to generate offset transactions, if required

• Method to divide the source amount among the target projects and tasks

• Attributes for the allocation and offset transactions, including the expenditure type, expenditure organization, and expenditure type class for the resulting expenditure items

Defining the Allocation Rule

1. On the Project Costs work area, click Manage Allocation Rules in the Tasks pane.

2. Click Create to open the Create Allocation Rule page.

3. Complete the general details to define the allocation rule for the following key fields as shown in the table.

   Field	Value
   Business Unit	InVision Services
   Name	Shared Contract Services Allocation
   Description	Rule to allocate shared contract service costs
   Allocation Method	Incremental
   Allocation Period Type	Accounting Period
   Targets Selection	Within business unit
   Basis Method	Prorate
   Expenditure Organization	San Diego
   Expenditure Type Class	Miscellaneous Transactions
   Expenditure Type	Contract Services Allocation

Defining Allocation Sources

1. Click Sources and complete the key fields as shown in the table.

   Field	Value
   Allocation Pool Percentage	100
   Fixed Source Amount	0
   Amount Class	Fiscal year-to-date
   Amount Type	Burdened Cost
   Project Organization	San Diego
   Project	Contract Shared Service Center

Defining Allocation Targets

1. Click Targets and complete the key fields as shown in the table.

   Field	Value
   Line Number	1
   Project Organization	San Diego
   Project Type	Time and Materials
   Exclude	Leave unchecked
   Line Number	2
   Project Organization	San Diego
   Project	Vision Software Install
   Exclude	Select the check box.

Defining Allocation Offsets

1. Click Offsets and complete the key fields as shown in the table.

   Field	Value
   Offset Method	Source project and task
   Expenditure Organization	San Diego
   Expenditure Type Class	Miscellaneous Transactions
   Expenditure Type	Service Offset

Defining Allocation Basis Details

1. Click Basis and complete the key fields as shown in the table.

   Field	Value
   Basis Category	Actual Amounts
   Amount Type	Total Billable Burdened Costs
   Amount Class	Fiscal year-to-date
   Relative Period	0

2. Click Save and Close.