Factor allocation
A factor is a value associated with each post-to activity in an allocation. Factors are square footage, hours spent, units produced, to-date costs, or revenues for specific activities, and so on. To determine the percentage for each post-to activity in a factor allocation, use this formula:
Factor / Sum of all Factors = Allocation Percentage
Because the calculation determines percentages based on each post-to activity's pro rata share, 100% of the pool is always allocated in factor allocations.
Fixed and dynamic factors are available. With fixed factors, you define a value for each post-to activity that remains constant such as square footage. With dynamic factors, you map existing Project Accounting data to each post-to activity such as labor hours or period-to-date revenues posted to a given activity. You can use a dynamic factor to determine allocation percentages using posted or budgeted activity balances.
Consider these scenarios when using a fixed factor allocation:
- You are allocating 100% of the pool.
- The values on which the driver is based are unchanging.
- The values on which the driver is based are not already collected or stored in Project Accounting.
Consider these scenarios when using a dynamic factor allocation:
- You are allocating 100% of the pool.
- The values on which the driver is based change frequently.
- You are regularly posting or budgeting the units or amounts on which the driver is based in Project Accounting.
In these examples of fixed and dynamic factor allocations, Moose Wood Outfitters is using Project Accounting to track sales and costs for each of its store locations.
Fixed factor example
Moose Wood Outfitters allocates overhead costs to stores based on each store's square footage. They define an allocation that includes a factor for each post-to activity. In this example, each store is a posting activity. The factor identifies the square footage of each store.
| Activity | Factor (sq ft) | Calculation | Driver |
|---|---|---|---|
| St. Paul store | 40,000 | 40,000/100,000 | 40% |
| Chicago store | 35,000 | 35,000/100,000 | 35% |
| Denver store | 25,000 | 25,000/100,000 | 25% |
| 100,000 | 100% |
The St. Paul store is allocated 40% of the pool. If the square footage of store changed, such as for an expansion, then they would change the factor and the percentages would be adjusted accordingly.
Dynamic factor example
In this example, Moose Wood Outfitters allocates overhead costs to stores based on each store's sales. They defined a Sales account category for each store activity to capture this information. In the allocation, they associated each store's activity and Sales account category with the respective post-to activity. When they process the allocation, the application uses each store's sales amount to determine the percentage of total sales for each store.
| Activity | Sales | Calculation | Driver |
|---|---|---|---|
| St. Paul store | $580,000 | 580,000/1,800,000 | 32.2% |
| Chicago store | 750,000 | 750,000/1,800,000 | 41.7% |
| Denver store | 470,000 | 470,000/1,800,000 | 26.1% |
| $1,800,000 | 100.0% |