# Cost Allocation

The Mandrel cost allocation system allows you to allocate, i.e. subdivide, costs within individual cost elements. Costs may be allocated to different periods of time, or to different organizations, or in any other way that you can devise.

Cost allocation, in effect, converts the 2-dimensional cost item/cost element structure into a 3-dimensional structure, such as cost item/cost element/time.

Defining a Cost Allocation System

A cost allocation system may contain up to 64 separate allocation blocks. Each block may represent a calendar period or some other method of subdividing costs. Once a cost allocation system has been defined, Mandrel will automatically accommodate it in its data input and reporting systems.

Example

If a project were scheduled to last three years, say 2011 to 2013, you could set up a cost allocation system with 3 blocks, one for each year. If the total for a particular cost element were estimated at \$50,000, with \$10,000 occurring in 2011, \$25,000 in 2012, and \$15,000 in 2013, you would enter these values for that cost element for each year.

Alternatively, costs could be split between different phases of a project (Phase A, Phase B, etc.), or between different companies, or between different branches or divisions of the same organization.

Adding Cost Elements

If a cost allocation system has N blocks, cost elements will be added in groups of N.  For example, if your allocation system has 4 blocks, representing the years 2011 to 2014, adding a direct cost to a cost item would result in adding 4 individual cost elements, one for each year.

Any cost item can contain up to 256 cost elements, including both direct and defined costs. The total number of independent direct or defined costs that you can have with 4 allocation blocks is 256/4 = 64. In more general terms, the number of independent costs in any one cost item that you can have with N allocation blocks is 256/N, or more precisely, the integral part of 256/N.

Application to Individual Cost Items

If a cost allocation system exists it will normally apply to every cost item in the cost breakdown structure. However, some cost items may not require to be allocated. For example, if your allocation system is based on time periods, some expenditures may not be time sensitive. You can switch off cost allocation for selected cost items.