2. COST ACCOUNTING CONCEPTS FOR IS ORGANIZATIONS › 2.6 Additional Accounting Options › 2.6.1 Support Services Accounting

2.6.1 Support Services Accounting

Most data center accounting concentrates on hardware usage
that is directly related to a job or session.  However, a
large portion of data center costs are not directly related
to hardware expenses.  The major expense for data centers is
personnel costs.  Large service bureaus, whose only business
is data processing, spend up to 70 percent of each revenue
dollar on labor.  For data processing operations that are
internal to the company, personnel costs are typically
one-fourth to one-third of total data center expenses.
Obviously, a large portion of data processing costs are not
equipment costs, but still need to be accounted for in
costing data processing service.

The most common accounting approach for support costs in data
processing is to assign each support person or cost to a
specific hardware category.  For example, tape operators are
part of the tape cost center; computer operators are included
in the CPU cost center, etc.  The personnel or costs that are
left over are usually called overhead and are allocated to
all the direct cost centers based on some formula.

This approach is successful if sufficient care is taken to
assign the support costs.  It is usually possible to assign
almost every cost to an appropriate cost center.  Some
examples of support service items for which an IS
organization can charge its users include courier service,
data entry, development work, training, printing, and
the loan or exclusive use of hardware and software.

Obviously, the assignment of support costs affects the rate
that would be charged to break even in a particular cost
center.  For example, if tape equipment costs $1,000 per week
and 100 tape mounts were made in an average week, then mounts
would appear to cost $10 per mount.  But since $2,000 is also
spent per week in labor for the tape operators, the true cost
of the mount is closer to $30.

To obtain the most valid method of distributing costs to
users, you should include the cost of support services in an
IS accounting system.