Cost Allocation Examples

  • Allocation based upon usage: The cost of lab supplies allocated based upon the quantity used on each project.

    A Principal Investigator uses 5 gallons of solution per month on Project A and 7 gallons of the same solution per month on Project B. The department orders 12 gallons of solution per month at $7.99 per gallon (including tax and shipping). The total cost is $95.88. Project A should be charged $39.95 ($7.99/gallon x 5 gallons) and Project B should be charged $55.93 ($7.99/gallon x 7 gallons).

  • Allocation based upon number of experiments:The cost of syringes allocated based upon the number of experiments performed on each project.

    A Principal Investigator uses syringes to conduct experiments on two of his research grants. The syringes are only good for one experiment and then they must be thrown away. The PI keeps a log of how many experiments are performed on each project per week. Syringes are ordered every two weeks at $1.05 per syringe. The log indicates the following:

    Project A: Week 1: 25 Experiments Week 2: 39 Experiments
    Project B: Week 1: 19 Experiments Week 2: 16 Experiments

    The total cost of the syringes is $103.95 (99 experiments x $1.05/syringe). Project A should be charged $67.20 (64 experiments x $1.05/syringe) and Project B should be charged $36.75 (35 experiments x $1.05/syringe).

  • Allocation based upon number of hours: The cost of computer software allocated based on the number of hours logged on for each project.

    A research assistant uses the same software program for two research projects. The research assistant is given an individual sign on name for each of the projects. By signing on with individual user names, the computer is able to keep track of how many hours are spent on each project. The quarterly report indicates 55 hours were spent on Project A and 305 hours were spent on Project B. This is all of the work that will be done with this program. The software cost $390 total. Project A should be charged $330.42 (305 hours/360 hours x $390) and Project B should be charged $59.58 (55 hours/360 hours x $390).

  • Allocation based upon the number of clients served: The cost of personality tests allocated based upon the number of clients served.

    Project A and Project B require their subjects to take a personality test and the same test is used on both projects. The test costs $200 and is ordered in bulk to save money. Project A uses 50 tests and Project B uses 550 tests. The total cost of the tests is $120,000. Project A should be charged $10,000 (50 tests x $200/test) and Project B should be charged $110,000 (550 tests x $200/test).

  • Allocation based on percentage effort The cost of lab supplies proportionately allocated based upon the PI's percentage of effort charged to each project.

    A Principal Investigator spends 70% effort on Project Genome and 30% effort on Project DNA. The Principal Investigator uses lab supplies totaling $6,000/month on the two projects. Project A should be charged $4,200 (70% of $6,000) and Project B should be charged $1,800 (30% of $6,000).

  • Allocation based on square footage: The salary of a student assistant cleaning glassware in two laboratories that are conducting similar research proportionately allocated based upon the square footage of the two laboratories.

    A student is paid a salary of $1,200 a month to clean glassware in two laboratories that are conducting similar research. Note : The only research performed in Lab A is on Grant A and the only research performed in Lab B is research on Grant B. In this example, the square footage of the laboratories could be used as a reasonable basis. Lab A is 1,400 square feet and Lab B is 1,000 square feet. Lab A should be charged $700 (1,400-sq. ft/2,400 sq. ft x $1,200) and Lab B should be charged $500 (1,000-sq. Ft/2,400 sq. ft x $1,200).

  • Allocation based on FTEs: The cost of renting space allocated based upon the number of FTEs working on each project.

    There are 5 FTEs employed on Project A and 8.5 FTEs employed on project B. The Center for Penguin Research is located in Alaska (off campus) and pays $5,500 in rent each month. These are the only two grants that are performed and managed at this site. Project A should be charged $2,037.04 (5/13.5 x $5,500) and Project B should be charged $3,462.96 (8.5/13.5 x $5,500).

 

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