Overhead Allocation
Overhead allocation is the practice of distributing indirect costs to revenue producing contracts.
After indirect costs are distributed, the revenue from contracts supports the total cost of doing business. Overhead is calculated when you run the overhead allocation process or when you close a period. When you allocate overhead, Vantagepoint does not make any entries in your general ledger.
When more than one accounting period is open and overhead needs to be run in a prior period, you cannot run overhead allocation in the new period. This is to prevent artificially high overhead figures from appearing on new period reports.
You can run overhead allocation on a company-wide basis or by organization.
Overhead Allocation Setup
Before you run overhead allocation, you need to set up your overhead parameters in .
If you are allocating overhead on an organization basis, you need to decide the method of allocating overhead by organization in in the desktop application. This setup program allows you to identify the distribution method for non-operating organizations and the allocation method for operating organizations. You can set up overhead distribution for each non-operating organization combination you specify whether or not you want to distribute overhead from non-operating to operating organization(s).
General Steps
Overhead allocation distributes overhead to regular projects and tasks to which direct labor or revenue has been charged during the accounting year. In addition, if you use organizations in Vantagepoint and you enable overhead allocation by organization, this program distributes overhead expenses from non-operating organizations.
You charge all indirect labor costs and indirect expenses to overhead projects. Vantagepoint then distributes these overhead costs to all regular projects, according to the allocation method you have chosen.
Print the Overhead Allocation Report when overhead allocation is complete. This report shows the immediate results of the allocation of overhead. Vantagepoint does not make an accounting entry for the reported allocation. The distribution appears on project reports at cost rates.
Organization Overhead Test
Whenever you run overhead allocation (to allocate overhead on a company-wide basis or to allocate overhead based on organizations), the application performs a test prior to allocating overhead to ensure that all necessary information has been set up. The Organization Overhead Test Report lists problems, if any, with the way in which overhead allocation information is set up.
Vantagepoint computes the overhead rate if you choose prorated allocation, or uses the assigned overhead rate if you choose assignment.
Running Overhead Allocation in the Current Period
Because you can enter data for any previous accounting period in your database, overhead allocation should not be run in the new (current) period until it has been run in the prior period. Because the foundation of overhead allocation comes from year-to-date calculations (or estimates, when using assignment) the change of data in any earlier period affects the accuracy of current data in any later period.
Multiple Companies
If you use multiple companies, you need to run overhead allocation for each company.