COST ALLOCATION PROCESS - 9204-MAR-2010

(New: 03/2010)

The following illustrations display the cost allocation process of personal services, operating expense and equipment, service units, and a reconciliation of program costs to the general ledger. Departments must allocate costs to the program level required by their program budget.

Each department will ensure that all costs have been allocated by reconciling the total costs allocated with the total expenditures reflected in the appropriation expenditures account (including accrual expenditures) in the general ledger at June 30.

 

9204 ILLUSTRATION
ALLOCATION OF PERSONAL SERVICES COSTS
FOR THE FISCAL YEAR ENDING JUNE 30, ____1/
				PROGRAMS								PROGRAMS
UNITS		DIRECT HOURS		10	15	20	25	30		PERSONAL SERVICES COSTS2/		10	15	20	25	30	ADMIN
1		65,000		20,000	15,000	10,000		20,000		400,000		123,200	92,400	61,200		123,200
				30.8%	23.1%	15.3%		30.8%
2							X3/			630,000					630,000
3		125,000		40,000	50,000	35,000				750,000		240,000	300,000	210,000
				32%	40%	28%
4		80,000					40,000	40,000		540,000					270,000	270,000
							50%	50%
5 & 7	4/	150,000		10,000		100,000		40,000		960,000		64,320		639,360		256,320
				6.7%		66.6%		26.7%
6		90,000			30,000		60,000			650,000			216,450		433,550
					33.3%		66.7%
ADMINISTRATION										300,000							300,000
										4,230,000		427,520	608,850	910,560	1,333,550	649,520	300,000
PERCENTAGE OF TOTAL PERSONAL SERVICES												10.1%	14.4%	21.5%	31.5%	15.4%	7.1%
PERCENTAGE OF TOTAL PERSONAL SERVICES WITHOUT ADMINISTRATION												10.9%	15.5%	23.2%	33.9%	16.5%
Allocation Steps:
		a. Determine the hours charged to each program.
		b. Determine the percentage of direct hours charged to each program to the hours charged to all programs.
		c. Use the percentages in b above to allocate the unit's personal services costs.
		d. After the personal services costs of all units are allocated, total the costs charged to each program. Determine percentages of each program to total costs for all programs including administration.
1/ Allocation may be made as often as the department desires, with a minimum of once a year at year-end.
2/ Personal services costs are the actual amount paid for personal services and staff benefits.
3/ Unit 2 personnel do not keep time sheets since all of their time is spent on one program.
4/ Units 5 & 7 are combined because their salary mix is the same.

 

9204 ILLUSTRATION
ALLOCATION OF OPERATING AND EXPENSE AND EQUIPMENT COSTS
FOR THE FISCAL YEAR ENDING JUNE 30, ____1/
		TOTAL EXPENDITURES
				PROGRAMS						ADMINISTRATION
				10	15	20	25	30
Freight		5,000					5,000
Consulting Services		25,000			25,000
Rent		200,000		20,000	35,000	40,000	53,000	45,000		7,000
Travel-In-State		120,000		15,480	21,960		48,240	23,520		10,800
				12.9%	18.3%		40.2%	19.6%		9.0%
Other OE&E		700,000		70,700	100,800	150,500	220,500	107,800		49,700
				10.1%	14.5%	21.5%	31.5%	15.4%		7.1%
Equipment		40,000				30,000		10,000
TOTAL		1,090,000		106,180	182,760	220,500	326,740	186,320		67,500
Allocation Steps:
	a Charge to programs those costs which can be identified directly to a program (freight, consulting services, amd equipment)
	b Allocate expenses by their allocation bases:
		1) Rent is allocated on the basis of square feet.
		2) Travel-in-state is allocated on the basis of actual personal services costs charged to those programs which require its personnel to travel.
		3) All other operating expenses which cannot be identified directly to a program or allocated more accurately utilizing another allocation basis is allocated on the basis of salaries and wages costs charged to programs.
Note: This example shows different allocation bases used to allocate different types of costs. Departments will use a basis which will allocate each type of cost equitably.

 

9204 ILLUSTRATION
ALLOCATION OF SERVICE UNIT AND ADMINISTRATION COSTS TO PROGRAMS
FOR THE FISCAL YEAR ENDING JUNE 30, ____1/
ALLOCATION OF SERVICE UNIT COSTS TO PROGRAMS
				PROGRAMS
				10	15	20	25	30		ADMINISTRATION
Hours		2,001		84	100	335	1,339	59		84
Allocation Percentages		100%		4.2%	5.1%	16.7%	66.9%	2.9%		4.2%
Service Unit Costs		239,000		10,038	12,189	39,913	159,891	6,931		10,038
ALLOCATION OF ADMINISTRATION COSTS TO PROGRAMS
				PROGRAMS
ADMINISTRATION				10	15	20	25	30
Personal Services		300,000
OE&E		67,500
Service Unit Costs		10,038
	TOTAL	377,538
Allocation Percentages 1/		100%		10.9%	15.5%	23.2%	33.9%	16.5%
Allocation		377,538		41,152	58,518	87,589	127,985	62,294
1/ Percentage is calculated by dividing total of program's personal services by the total of the department's personal services.

 

9204 ILLUSTRATION
RECONCILIATION OF PROGRAM COSTS
FOR THE FISCAL YEAR ENDING JUNE 30, ____1/
RECONCILIATION OF PROGRAM COSTS
									TOTAL COSTS
			PROGRAMS
			10	15	20	25	30
Personal Services			427,520	608,850	910,560	1,333,550	649,520		3,930,000
OE&E			106,180	182,760	220,500	326,740	186,320		1,022,500
Service Unit Costs			10,038	12,189	39,913	159,891	6,931		228,962
Administration			41,152	58,518	87,589	127,985	62,294		377,538
	Total Program Costs		584,890	862,317	1,258,562	1,948,166	905,065		5,559,000
	Total Per General Ledger
		Appropriation Expenditures Account							5,559,000