#Conceptdraw office 3 cost software

The purpose of the security function is the same for all Segments. This prevents double counting of home office expensesĮXAMPLE: The home office performs a security function for Segments A, B, and C. CAS 403-40(a)(2) states that no segment shall have allocated to it as an indirect cost any costs incurred for the same purpose that has been allocated directly to that or any other segment.

#Conceptdraw office 3 cost software

Payroll is related based on number of employees while software development is based on number of computers (or some other measure of computer usage). This practice is in noncompliance with CAS 403 because payroll and software development do not have the same relationship to the segments. The contractor groups the payroll and software development functions in a single pool and allocates the pool to the segments based on number of employees. Segment I is a manufacturing operation in which only about one in ten employees use a computer, and only about one in fifteen have their own computer workstation. Segment H is a service industry in which almost all employees have their own computer workstation and utilize the computer on a daily basis. Under CAS 403-40(a)(1), expenses that are not directly allocated shall be grouped in logical and homogeneous expense poolsĮXAMPLE: A home office performs the payroll and software development functions for both of its segments, Segments H and I.This is in noncompliance with CAS 403, since it is practical for the contractor to directly allocate the costs of the cleaning services directly to each of the segments. The contractor groups the entire cost of the cleaning services in a single pool and allocates the costs on the basis of total square footage of all buildings occupied by Segments M, N, and O. Segment M is in Ohio, Segment N is in Texas, and Segment O is in Georgia. CAS 403-40(a)(1) requires that home office expenses be allocated directly to segments to the maximum extent practical.ĮXAMPLE: A contractor performs building cleaning services for Segments M, N, and O.The contractor could correct this problem by using number of purchase orders, dollar value of purchase orders, or some other base that represents a beneficial or causal relationship between the inspection function and the utilization of that function by Segments X, Y, and Z. This practice is in noncompliance with CAS 403, since there is no beneficial or causal relationship between the direct labor dollars incurred by a segment and the materials inspection function. The contractor allocates the cost of the materials inspection function to segments on the basis of segment direct labor dollars. Segments Y and Z are manufacturing operations that utilize large quantities of materials. Segment X performs mostly service contracts with very little material costs. The home office performs the materials inspection function for each of these segments. In accordance with CAS 403-40(a)(1), home office costs must be allocated on the basis of the beneficial or causal relationship between supporting and receiving activities.ĮXAMPLE: A contractor has three segments.This is covered by CAS 420.īasic Allocation Requirements/Techniques for Allocating Home Office Expenses to Segments The allocation of IR&D/B&P from the home office to segments.The accounting treatment of the home office expenses after they have been allocated to the segments, i.e., how segments allocate the home office expenses to contracts.The allocation of home office expenses to segments of the organization (CAS 403-20(a)).

Part 3 will address special allocations of home office expenses to segments.īackground: To provide criteria for allocating home office expenses to the segments of an organization based on the beneficial or causal relationships between the expenses and the receiving segments (CAS 403-20(a)).

Part 2 will address the requirements/techniques for allocating home office residual expenses to segments.

This Part 1 addresses the basic requirements/techniques for allocating home office expenses to segments.

Each part addresses the fundamental requirements and techniques for application related to the standard, and provides specific examples.