IT Cost Allocation: Basis Design, Zero Basis, and Rerun Duplication
A shared services center allocates $1,200,000 of annual IT costs from cost center 900 to four divisions: North, South, East, and West. The allocation is supposed to follow service-desk ticket volume, which is captured in statistical account 9910. In the January test, the rule allocated $0 to West because its 9910 balance was zero, and the whole pool went to the other three divisions; the journal also left a $0.02 residual in cost center 900. The rule was built with basis "Headcount" because the ticket data arrives late, and the basis source is "Actual" PTD. The target accounts are 6100 for each division. The allocation journal was generated but not posted, and the team reran the allocation after correcting a target, producing a second journal. They now see $2.4M of allocated cost.
1. Why did West receive $0, and how should the basis be designed?
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West received $0 because the rule used Headcount as the basis and West's headcount balance was zero or missing; the allocation engine allocates only where a basis amount exists. The business intent is ticket volume, so the basis should be statistical account 9910, with balances loaded and posted before the allocation runs. Confirm the basis source is Actual PTD and the statistical account is enabled for the ledger. If ticket data arrives late, do not silently switch to headcount; stage the allocation until the statistic is ready, or use an approved fallback basis with a documented policy. Check that all four divisions have targets and that a zero basis is a genuine zero, not missing data.
2. What caused the $2.4M and the $0.02 residual, and how should the run be corrected?
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The $2.4M is two allocation journals of $1.2M each. The team reran the allocation after correcting a target, and the rerun created a second journal without reversing the first. The $0.02 is a rounding residual because the basis does not divide the pool evenly at two decimals. Reverse the duplicate before posting, or post a correcting entry if it is already posted. Then set the rule's rounding to assign the residual to a designated target, such as the largest basis, rather than leaving it in the pool. Control reruns with a unique run description or a reverse-then-rerun procedure, and always review the generated journal before posting.
3. What sequence should the team follow before and after running the allocation?
Read the worked answer
Post the statistical basis first, then verify basis completeness by division. Run the allocation, review the journal for total, targets, and residual, post it, and only then close the cost centers. If one allocation feeds another, run them in dependency order after the source pool is final. Keep the offset account consistent so the pool nets to zero. Reconcile before and after: source $1.2M, allocated $1.2M, residual $0. Document any fallback basis and the reason. The allocation is not finished when the journal is generated; it is finished when the journal is posted and the pool reconciles.