Allocations

Allocations are used to distribute costs, revenues, hours, or units to multiple activities. Amounts and units are allocated based on a percentage, a factor, or an equation that represents the ratio you want to use for distribution. You can allocate any balance stored in Project Accounting or General Ledger. These are some typical situations that require allocations:

• costs or revenues are indirect and cannot be attributed to a specific activity

• resource costs or revenues are shared by multiple activities

• the amount of work required to directly capture information in specific activities cannot be justified

An example of a cost that can be allocated is the cost for electric power. The electricity is used by all resources performing activities in the building and it is impractical to manually split the cost by activity. Additional examples of costs that are commonly pooled for allocation are:

• research and development

• fringe benefits

• senior management salaries

• depreciation

An allocation consists of a pool, a driver, and post-to activities. Pools consist of amount or unit balances, which are allocated to post-to activities based on a driver. Post-to activities are the activities to which allocation transactions are posted. You can think of an allocation in terms of this formula: Pool * Driver = Allocation.