Service Center

There are three primary reasons to use a service center instead of a cost pool to allocate costs: to enable allocations to projects as direct costs; to use a manual base allocation method such as square feet or head count; or to use standard cost as the allocation method.  

1. You can use service centers to allocate service center costs directly to projects. Cost pools allocate only as indirect costs.  For example, if you have costs for your network and some of those costs can be allocated directly to projects, you can use usage hours to allocate some of the costs directly to projects and some to other overhead pools.  You can use the direct cost allocation amount in the base of other cost pools as well.

2. You must use a service center instead of a cost pool if you need a base that is other than dollars or hours.  If you need to allocate using square feet, head count, hours usage, etc., you will need to set up a service center with a manual base.  You can then allocate costs as direct or indirect costs using the desired base.  You must set up the base of this type of service center for each period in the Allocation Journal.

3. You must use a service center to allocate costs using a standard cost per unit.  This is commonly done for service centers.  For example, let's say your service center is a copier center. You would set up the pool costs associated with the copier center and enter the number of copies by project or department for the period in the Allocation Journal.  When you run the Compute & Print Pools Rates screen (Projects\Process\Allocations), the system will multiply the cost per unit that you have specified in this screen by the number of units that you entered in the Allocation Journal and allocate the appropriate cost to projects.

Service centers are calculated as part of the Compute & Print Pools Rates process (Projects\Process\Allocations) but no report is printed.  You can print the Service Center Cost Allocation Report to obtain more information on the activity of service centers.  Rates are not calculated or reported for service centers.

Select this radio button to manually enter the units for each base account/organization combination in the Maintain Allocation Journal screen (Projects\Transactions\Allocations). The system uses these units to calculate allocation amounts for the service center. If you select the Automatic method, the system will derive the base units.

If you select the Manual radio button, you do not need to set up account/organization combinations in the Pool Base subtask.

Select this radio button to have the system find all hours or amounts that were posted to the General Ledger or Labor Summary for each base account/organization combination set up in the Pool Base subtask. The system uses these hours or amounts to calculate the allocation amounts for each base account/organization combination.

The Automatic radio button is available only if you selected either the Dollars or Hours Basis Type in the main screen. If you selected the Units Basis Type, only the Manual Calculation of Base method is available.

Select this checkbox to choose the alternate (or standard rate method). This method uses a pre-determined rate that is multiplied by the units for each base account/organization combination, giving the allocation amount for that portion of the base. Allocation amounts calculated with this method generally do not match the service center cost incurred for the period and result in a residual amount that accumulates in the service center. Please note that, because a residual amount of service center cost remains unallocated, this method affects indirect expense pool rates, since all operating costs are not fully included in those rates.

If you leave this checkbox unchecked (which means you are using the full allocation method), the system will divide each portion of the base by the total base, giving the percentage of the service center cost that will be applied to each portion of the base. This method results in a full allocation of service center cost (except for amounts caused by rounding) on a period basis.

At the end of the fiscal year, you must change the alternate (or Standard Rate method) to the full allocation method (i.e., leave this checkbox blank) in order to fully allocate the service center. Or, if the residual is not great, create a Journal Entry to post the residual to an overhead pool.

Enter the standard rate per unit to be used if you select the Apply Standard Cost Per Unit checkbox. If you did not select the Apply Standard Cost Per Unit checkbox, this field will not be available.

Select this radio button to use current period service center cost as the amount to allocate.

Once the system calculates the allocation amounts using this method, it will check the current period posted amount in the General Ledger for a given allocation account/organization combination.  The system will then adjust the amount to be posted so that the amount in the General Ledger is equal to the original service center calculation after the allocation journal is posted.

Select this radio button to use year-to-date service center cost as the quantity to allocate.

Once the system calculates the allocation amounts using this method, it checks the year-to-date posted amount for a given allocation account/organization combination in the General Ledger and adjusts the amount to be posted so that the total amount posted year-to-date for that account/organization combination is equal to the year-to-date allocation amount originally calculated.

Note: Because this is a year-to-date service center, the units that are entered in the Allocation Journal must also be year-to-date units.

Select this radio button to calculate service center allocation amounts to post for Standard Rate service centers only. This option is available only when the Apply Standard Cost Per Unit checkbox is selected, and allows for posting of the calculated allocation amount without any adjustment for prior postings.