3. COST ACCOUNTING AND RATE DETERMINATION › 3.2 Load Center Cost Determination

3.2 Load Center Cost Determination

You should consider the following steps in structuring the
load center costs for the IS organization:
 
1.  Identify the individual load centers that comprise the
    total IS organization.
 
2.  Determine whether each load center is direct or indirect
    (see Section 3.3, Direct and Indirect Classification).
 
3.  Define the rate that will be used to distribute the
    enterprise's overhead against the IS organization (that
    is, the burden rate).
 
4.  Calculate the cost of each load center by following this
    procedure:
 
    o  Determine all direct costs of hardware, materials, and
       labor.
 
    o  Determine all indirect costs of hardware, materials,
       and labor, and define how each of these items is to be
       distributed against the direct costs.
 
    o  Determine what other indirect costs might be
       distributed against this load center, short of
       including the overhead represented by the load centers
       defined as indirect.
 
5.  Apply the corporate burden rate against each of the load
    centers based on your organization's accounting
    practices.
 
6.  Evaluate how each indirect load center should be
    distributed as overhead against each of the direct load
    centers.