Allocation loop: examples
In the first two examples, a total of $10,000 is to be allocated. In the first example, the driver is used. In the second example, there is no driver and the loop functionality is enabled.
The third example demonstrates how to configure the loop functionality in the demo data. It shows how changes to the basic configuration and the element selection affect percentages within specific elements of the hierarchy.
Example 1: General allocation
This table shows how the $10,000 amount is allocated based on the percentage of the driver:
| Location | Source % | Source $ | Driver % | Target Allocation $ |
|---|---|---|---|---|
| All locations | 100% | 10,000 | 100% | 10,000 |
| Germany | 80% | 8,000 | 40% | 4,000 |
| Berlin | 60% | 6,000 | 20% | 2,000 |
| Hamburg | 5% | 500 | 10% | 1,000 |
| Munich | 15% | 1,500 | 10% | 1,000 |
| United States | 20% | 2,000 | 60% | 6,000 |
| New York | 10% | 1,000 | 30% | 3,000 |
| St. Paul | 10% | 1,000 | 30% | 3,000 |
The $10,000 is allocated to the target area. The allocation percentage is defined by the Driver % column. The Target Allocation $ column shows the amounts that are allocated for selected locations.
Example 2: Allocation Loop
In this example, the driver is not used and only the source and target are specified. The amounts are allocated to the target proportionally by source.
This table shows how the $10,000 amount is allocated using the loop functionality. The target percentage is recalculated based on the percentage of the source:
| Location | Source % | Source $ | Allocation % | Target Allocation $ |
|---|---|---|---|---|
| All locations | 100% | 10,000 | 100% | 10,000 |
| Germany | 80% | 8,000 | Loop 1 - 100% | 8,000 |
| Berlin | 60% | 6,000 | 75% | 6,000 |
| Hamburg | 5% | 500 | 8% | 500 |
| Munich | 15% | 1,500 | 19% | 1500 |
| United States | 20% | 2,000 | Loop 2 - 100% | 2,000 |
| New York | 10% | 1,000 | 50% | 1,000 |
| St. Paul | 10% | 1,000 | 50% | 1,000 |
The $10,000 amount is allocated to the target area. The percentage within an element hierarchy is adjusted depending on how the usage of the loop is defined.
The percentage is defined by the Source % column. Within each loop, the Allocation % column is calculated based on the loop definition. The values for selected elements are not changed from source to target, only the percentages are affected.
Example 3: Demo data
You can use this example to review how the looping functionality can be used. The basic configuration in the demo data uses the loop functionality in Segment 2.
In this example, the Material cost center ordered and paid all indirect material costs for freight and packing charges for the Sales cost center. To charge Sales within Europe, the resulting indirect cost must be distributed from the Material cost center to the Sales cost center.
The allocation is done according to a proportional distribution of the direct material cost within Europe. This approach considers different cost levels of elements within Europe.
By default, looping is enabled and Level 1, All Segments 2 is selected. To allocate values to all base elements of Europe, you must change the Segment 2 to represent Level 2 of Europe.
This table shows the percentage of the driver and the corresponding proportions and amounts to be allocated to base elements of Europe:
| Location | Driver % | Allocation % | Target Allocation $ |
|---|---|---|---|
| All Segments 2 | 100% | 100% | 5,360,000 |
| Europe | 69% | Loop 1 - 100% | 3,698,400 |
| Switzerland | 35% | 50% | 1,849,200 |
| Germany | 13% | 19.2% | 711,231 |
| France | 21% | 30.8% | 1,137,969 |
Because looping is enabled and Level 2 of Europe is selected, the Allocation Level 0002 affects Europe and its base elements. The percentages within hierarchy elements below Europe are calculated based on the percentages defined by the driver.
To calculate the exact amounts to be allocated to elements within the Europe hierarchy, first determine the amount in the source data area. That is the value for Other Operational Expenses (Material) for the Material cost center for Europe. The amount is 3,698,400. This represents the value to be allocated within the base elements of Europe.
For Switzerland, for example, the direct material costs for the Sales cost center amount to 50% of all direct material costs in Europe. Based on this percentage, Switzerland gets 50% of the allocated amount. The resulting target allocation is 1,849,200.