Expense Allocation by
Activity Performed
View
Template for: SHU Expense Allocation by Activity
The purpose of this section is to allocate expenses by SHU
activity.
Depending upon the reporting requirements of the organization, it may be
worthwhile to present a few years of history as well as current expenses and
planned expenses.
According to Michael
Porter, activity costs can be divided into three categories. These
categories are:
- Human resource costs;
- Operating costs;
- Fixed-asset costs.
Each of the terms above is defined in the glossary near the end of this book.
It is fairly straight forward to compute human resource costs and operating
costs. However, to compute fixed asset costs (e.g., to allocate the annual cost
that should be recognized for using a mainframe computer that has four years of
life left) use the formula:
(Asset Replacement Cost / Years of Remaining Life)
If the SHU shares the asset with other SHUs and / or SBUs, then multiply
the quotient calculated above by the percent allocation of the asset used by the
SHU.
Example of I/S Department of Utility Company XYZ
( $ in 000's )
| Activity Name |
1995
Actual
Total
Activity
Costs |
1996
Est.
Human
Resource
Costs |
1996
Est.
Opera-
ting
Costs |
1996
Est.
Fixed
Asset
Costs |
1996
Est.
Total
Activity
Costs |
| I/S Mgmt & Admin |
$ 200 |
$ 150 |
$ 20 |
$ 30 |
$ 200 |
| Mainframe Ops Support |
$ 900 |
$ 450 |
$ 120 |
$ 230 |
$ 800 |
| Application Development |
$ 700 |
$ 500 |
$ 100 |
$ 100 |
$ 700 |
| PC Management Support |
$ 400 |
$ 400 |
$ 80 |
$ 120 |
$ 600 |
| Image-based System Dev |
$ 300 |
$ 120 |
$ 60 |
$ 70 |
$ 250 |
| Internet Development |
$ 500 |
$ 250 |
$ 170 |
$ 80 |
$ 500 |
| Telecommunications |
$ 200 |
$ 70 |
$ 50 |
$ 80 |
$ 200 |
| EDI Development |
$ 100 |
$ 50 |
$ 40 |
$ 40 |
$ 130 |
|
Total Expenses:
|
$3,300 |
$ 1,990 |
$ 640 |
$ 750 |
$ 3,380 |
| 
