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Unallocated Job Costs



Chances are you have unallocated job costs. Usually it's from repairs and maintenance on equipment or vehicles, fuel, insurance or depreciation. Unallocated labor pops up occasionally as well. From my experience, there's no right or wrong way to address these costs as long as they're showing up "above the line" in cost of construction revenues.


There are multiple schools of thought on how to address cost allocations. One says you allocate everything to jobs; meaning each job is getting a percentage of repairs and maintenance, depreciation, insurance, etc. Another approach is to allocate some of the costs to the jobs based on cost drivers. Heavy equipment users for example, would allocate fuel, repairs and maintenance, depreciation to jobs based on equipment usage. Everything else would remain unallocated. Another approach is to not allocate anything. Essentially, the contractor leaves large cost pools outside the project subledger. Repairs and maintenance, fuel, insurance, belong to all jobs but none at the same time!


I've made a video illustrating some of these points on my YouTube channel.



Thanks!

Ara

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