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:
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Source of the amounts to allocate
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Target projects and tasks to receive the allocation
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Method to generate offset transactions, if required
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Method to divide the source amount among the target projects and tasks
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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
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On the Project Costs work area, click Manage Allocation Rules in the Tasks pane.
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Click Create to open the Create Allocation Rule page.
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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
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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
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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
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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
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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
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Click Save and Close.