Fully Allocated Cost Analysis

148 Pages·2015·7.35 MB·English

us Department
otTransportation
UrbanMass
Transportation
Administration
FULLY ALLOCATED COST ANALYSIS
GUIDELINES FOR
PUBLIC TRANSIT PROVIDERS

FULLY ALLOCATED COST ANALYSIS
GUIDELINES FOR PUBLIC TRANSIT PROVIDERS
APRIL, 1987
PREPARED BY
PRICE WATERHOUSE
OFFICE OF GOVERNMENT SERVICES
Piftasfi Direct Inquiries to
Fred U. Pshyk, Partner [phone]
Paul E. Lohneis. Partner [phone]
James M. Holec, Jr., Senior Manager [phone]

TABLE OF CONTENTS
SECOND EDITION
SECTION PAGE
-
INTRODUCTION
I.
A. Fully Allocated Cost Analysis - A Definition 1
.
B. Organization of the Report 2
II. FULLY ALLOCATED COSTS - WHAT TO INCLUDE
A. Components of a Fully Allocated Cost
Estimate 4
B. Identifying Direct and Shared Cost.s......
for a Segment of Transit Service 6
III DEVELOPMENT AND APPLICATION OF A FULLY ALLOCATED
.
COSTING MODEL - THE BASICS
A. Allocating Costs with a Three-Variable
Unit Cost Model - An Example 9
B. Additional and Alternative Allocation
Variables for Developing Unit Costs 20
C. Optional Methods for the Development of
Fully Allocated Cost Estimates 23
IV. DEVELOPMENT AND APPLICATION OF A FULLY ALLOCATED
COSTING MODEL - ADDED COMPLEXITIES
A. Multiyear Service Proposals 33
B. Complex Operating Environments 40
V. PRINCIPLES FOR THE TREATMENT OF COSTS THAT ARE UNIQUE
TO PUBLIC AND PRIVATE SECTOR TRANSIT PROVIDERS
A. Differences in Public and Private Sector
Costs 54
B. Principles for Treating Differences in
....
Public Sector and Private Sector Costs 60

APPENDICES
A. References for Costing Analysis
B. Glossary of Terms Used for Cost Allocation and Estimation
C. Generally Accepted Methods for Estimating Specific Cost
Elements
D. Generally Accepted Methods for Computing Depreciation
Expense
E. Generally Accepted Methods for Treatment of Capital Leases
F. Competitive Services Board's Principles on Cost Comparisons
in Competitive Bidding

—
LIST OF EXHIBITS
EXHIBIT
NUMBER TITLE PAGE
1 Hypothetical Transit Organization
Structure 7
2 Summary of the Cost Allocation Process 11
. .
3 Assignment of Expense Object Classes to
Allocation Variables 12
4 Calculation of Total Costs Assigned to
Each Allocation Variable 14
5 Calculation of Unit Costs 16
6 Calculation of Route-Specific Values
for Each Allocation Variable 18
...
7 Calculation of Fully Allocated Costs. 19
8 Summary of Cost Allocation Variable
Options 21
9 Process for Developing Fully Allocated
Costs Using Direct Cost Estimates 25
10 Use of Cost Build-up and Unit Cost Methods
to Estimate Route-Specific Operator Wage
—
Cost Example Calculations. 27
.
11 Summary of Cost Estimation Options 32
12 Projection of Selected Operating Costs. 35
. .
13 Projection of Revenue Vehicle Costs
An Example 39
14 Relationship of Organization Structure to
Shared Costs for a Multi-Modal, Single
Facility Transit System 43
15 Calculation of Unit Costs for a Multi-
...
Modal, Single Facility Transit System 44
16 Relationship of Organization Structure to
Shared Costs for a Single Mode, Multi-
Facility Transit System 47
17 Calculation of Unit Costs for a Single
....
Mode, Multi-Facility Transit System 48