The cost allocation clause outlines how financial responsibilities and expenses are distributed among the parties involved in a contract. It specifies the proportion or method by which costs are shared, ensuring clarity and preventing disputes over financial obligations.
COST ALLOCATION The service provider levies a cost allocation for its services according to the cost-plus method using allocation keys. The costs related to the service provider’s services, regardless of their nature, shall be allocated to the service users on the basis of the causation principle. In addition to personnel costs, the allocation also applies to all material costs of the service provider on a full cost basis, which are to be allocated to the service users in accordance with the causation principle, insofar as they result in a benefit for them. 3 For the apportionment of costs, the actual usage and causation context in the respective business year of the service provider shall apply - to the extent as far as possible. The attributable and apportionable costs are allocated to the service users as follows: - Personnel and other costs related to the service provider’s own administrative activities are not apportioned to the service users. Costs of the service provider’s own administration and management are therefore not apportionable. - Personnel costs incurred as a result of acting for both service users or their subsidiaries are initially borne by ads E Inc for administrative reasons. Personnel costs include compensation and all related costs such as, but not limited to, salary and taxes, profit sharing, social security costs, fringe benefits and similar employment costs (so-called “compensation expenses”). ads E Inc is reimbursed by ads E plc for the portion of the compensation expenses attributable to ads E plc in accordance with the arm’s length principle. Within the scope of this reimbursement, compensation expenses are allocated according to the time spent on the activities for the respective service user. - Costs for the use of facilities or other property of the service provider by the service users or their subsidiaries shall be allocated according to the principle of causation in accordance with a fair, reasonable and arm’s length allocation of the costs and expenses associated with such use. These costs include in particular, but are not limited to, expenses for room rent, legal and accounting fees, telephone and fax costs, travel expenses, technical and communications support costs, and administrative or similar office costs (so-called “common overhead costs”). - In the event that the parties jointly contract with third party service providers or otherwise jointly benefit from any party’s contracts with third party service providers (which are not otherwise already included as joint overhead costs), the parties shall agree on a fair, reasonable and arm’s length allocation of the costs or expenses related to such third party service providers. An appropriate measure of apportionment in this regard may be the time expended by the third party service provider that is attributable to the respective contracting party
SETTLEMENT AND ADJUSTMENT OF COST ALLOCATION Preliminary billing is based on monthly advance payments. The cost shares planned for 2022 are shown in Annex 1. For subsequent years, a new annex shall be prepared by December 15 of the respective previous year. The service provider is entitled at any time to adjust the advance payments to the actual cost shares and the currently expected costs for the current year. In case of significant changes, the service provider is obliged to adjust the advance payments. The final determination of the cost shares to be allocated shall be made within the framework of the preparation of the annual financial statements for the past year on the basis of the determination of the actual allocable costs of the service provider as well as the ACTUAL revenues and ACTUAL employee numbers at the service users.
The parties to the Cost Allocation Agreement shall enter into a termination agreement substantially in the form as attached in Annex 8 to this Agreement. The Parties agree that the transfers under Clause 2 (3) and Clause 3 (1) sentence 2 will have the effect that M-AG will have no rights and obligations under the Cost Allocation Agreement anymore. For the avoidance of doubt, to the extent that provisions in this Agreement deviate Project Gordian Framework Agreement in Relation to the Separation of Fresenius Medical Care Management AG Page 8/11 from provisions in the Cost Allocation Agreement, provisions in this Agreement shall prevail.
Transmission Cost Allocation: Agreement on re-allocation of certain transmission costs between DEP and Duke Energy Carolinas (“DEC”). This agreement was filed separately in both the DEP and DEC rate case dockets.
This Amended and Restated Intercompany Services and Cost Allocation Agreement (this “Agreement”) is made and entered into as of May 16, 2018, by and among STEWARD AGRICULTURAL FUNDING PORTAL LLC (“SAFP”) and each of its affiliates identified as the other signatories hereto in the signature lines below in this Agreement (each an “Affiliate” and together the “Affiliates”) (each party hereto being referred to as a “Party” and collectively as the “Parties”).
Wind Production Cost Allocation: The Stipulating Parties agree the existing wind production cost allocation shall not change, and that it shall be allocated based upon 4-CP Average and Excess allocator.
Cost Allocation Agreement In January 2020, the Company entered into a Cost Allocation Agreement with NantKwest, or the Cost Allocation Agreement, pursuant to which the Company and NantKwest agreed to conduct a joint study for the clinical research being conducted pursuant to the protocol titled QUILT 3.063: A phase 2 study of combination therapy with an il-15 superagonist (N-803), off-the-shelf CD16-targeted natural killer cells (haNK), and avelumab without cytotoxic chemotherapy in subjects with Merkel Cell Carcinoma (MCC) that has progressed on or after treatment with a checkpoint inhibitor. Under the terms of the Cost Allocation Agreement, the parties will split certain joint study costs equally in accordance with the terms of the Cost Allocation Agreement and related work order. Shared joint study costs include costs related to conducting the joint study development activities, such as personnel-related costs, as well as all costs associated with regulatory matters. Costs and expenses incurred in connection with the development, manufacturing, supply, delivery, and pre-patient administration dosing mechanism of each party’s study drug are excluded from the shared joint study costs. Under the Cost Allocation Agreement, the Company and NantKwest will each receive exclusive rights to any new intellectual property developed that relates solely to our and its respective study drug, and will each have joint co-equal rights in any other developed intellectual property. The Cost Allocation Agreement expires upon the second anniversary of the effective date with an option to renew for additional successive one-year terms upon mutual agreement, but work orders for any joint studies still in process at the time of termination will continue until the applicable study is completed.
Under the Cost Allocation Agreement, each of NantKwest and the Company will receive exclusive rights to any new intellectual property developed that relates solely to its respective study drug, and the parties will have joint co-equal rights in any other intellectual property. The Cost Allocation Agreement expires on June 22, 2022 with the option to renew for additional successive one-year terms, but work orders for any joint studies still in process at the time of termination will continue until the applicable study is completed. See Note 15 for additional information.
There will be a minimum monthly payment payable by each of the JV and ALB. This is proposed to be a (to be determined) percentage (eg 10%) of the total monthly costs, calculated based on each party's share of the current installed processing capacity (ie ALB costs = Total Monthly Costs x 10% x (ALB Processing Capacity/Total Processing Capacity)). As there will still be costs incurred in relation to trains that are not producing in any month, the minimum payment is designed to ensure a party covers its fair share of the relevant costs (which would not be the case if costs were attributed purely based on production in a month).
Changes in segment cost allocations Beginning in the first quarter of 2023, we updated and simplified our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. For example: (i) certain costs associated with corporate initiatives supporting consumer-facing activities, previously reflected in unallocated corporate costs, are now allocated to Google Services; and (ii) centrally-managed shared research and development activities, including our shared developer tools, are now allocated based on an updated measure of the relative benefit derived from the services. As a result of these changes, more of the previously unallocated corporate costs are allocated to our segments, and more of certain previously allocated costs are allocated to our consumer-facing Google Services products and less to Google Cloud enterprise products.
Tenant’s Cost Allocation. For each calendar year after the Base Year, in addition to the Base Rent and all other payments due under this Lease, Tenant shall pay Tenant’s Cost Allocation, as follows: 4.2.1 Estimated Payments. Tenant shall pay Landlord’s reasonable estimate of Tenant’s Cost Allocation for each calendar year (the “Estimated Payment”) in advance, in monthly installments, commencing on the first (1st) day of the month following the month in which Landlord notifies Tenant of the amount it is to pay hereunder and continuing until the first (1st) day of the month following the month in which Landlord notifies Tenant of any revised Estimated Payment. Landlord shall estimate from time to time the amount of the Tenant’s Cost Allocation for each calendar year and then make an adjustment in the following year based on the actual Tenant’s Cost Allocation incurred for the prior year. In the event of any fractional calendar month, Tenant shall pay for each day in such partial month a rental equal to 1/30 of the Estimated Payment.
Updated Cost Allocation Policy Starting January 1, 2023, all activities related to changes in the code of SAP’s cloud and on-premise solutions are treated as development-related activities. Some of those activities, specifically code corrections, were previously considered as support-related activities. SAP believes this update aligns SAP’s accounting policy with market standards and increases comparability to its peers. In the third quarter 2023, this update of our cost allocation policy resulted in an increase of the cloud gross profit by approximately €25 million, an increase of the software license and support gross profit by approximately €65 million, and an increase of our R&D expenses by approximately €85 million. In the first nine months of 2023, the update of our cost allocation policy led to an increase of the cloud gross profit by approximately €70 million, an increase of the software license and support gross profit by approximately €195 million, and an increase of our R&D expenses by approximately €265 million. For the full year 2023, the updated cost allocation policy is expected to result in decreased cost of cloud by approximately €95 million and cost of support by approximately €260 million, while in consequence increased R&D expenses by approximately €355 million.
Cost Allocation: In general, the Company will pay 100% of the cost of Business Travel. However, in unusual circumstances, Business Travel may be contingent upon the Permitted Person entering into a time sharing agreement and reimbursing the Company for the reimbursable amount.
Allocated Costs Logics will pay the SurgePays Parties for the resources and overhead support to provide the activities listed in Exhibit A-1 based on an allocation of the costs (without markup) that are incurred by the SurgePays Parties for such resources and support. The costs for each service will be allocated to Logics based upon key metrics entities by the SurgePays Parties as part of their annual budgeting process and the allocation of those costs to their Subsidiaries. Prior to the Effective Date, the SurgePays Parties and Logics have agreed on the resources and overhead support that are entities to be required for the SurgePays Services through March 31, 2021 be paid by Logics for the SurgePays Services, as set forth below. This initial estimate of resources and support will be used as the monthly service fee for the SurgePays Services through March 31, 2021. For each six month period starting April 1, 2021 and thereafter, the Parties will review the amount of resources and overhead support actually required to perform the SurgePays Services during the prior six-month period, and the SurgePays Parties will use the actual level of resources and support in that prior period (with any adjustments which the Parties may mutually establish) to determine the monthly service fees for the SurgePays Services for the following six-month period using the cost allocation methodology described above. In connection with the foregoing, the revised service fees will be effective on April 1st and October 1st for each six-month adjustment and on April 1st for each annual adjustment. Prior to the effective date of the revised service fees, the Parties shall use commercial reasonable efforts to determine the amount of resources and overhead support required to perform the SurgePays Services in each prior period, and the SurgePays Parties will prepare a statement summarizing the revised service fees based on the cost allocation methodology described above for such resources and support.
C. Cost Allocation and Rate Design Pursuant to the Settlement, the Company will assign the base distribution rate increases by the percentage of volumetric base revenue11 generated from current base distribution rates (i.e., rates approved in D.P.U. 15-80) using the 2018 test year normalized volumes (Settlement at § 1.8.1). Further, the Settlement provides that the resulting allocated portion of the base revenue increase will be added to the 2018 volumetric base revenue of each volumetric rate component to determine the target volumetric base revenue by rate component (Settlement at § 1.8.1). Next, according to the Settlement, the target volumetric 11 The Settlement states that volumetric base revenue will include demand and energy revenue as well as luminaire charge revenue for Company-owned outdoor lighting (Settlement at § 1.8.1, n.4). D.P.U. 19-130 Page 10 base revenue by rate component will be divided by the 2018 test year normalized volumes and demand to derive the base distribution rates to become effective on November 1, 2020 (Settlement at § 1.8.1). The Settlement provides that the base distribution rate changes shall only impact the demand and energy components of base rates and for Company-owned outdoor lighting or luminaire charges (Settlement at § 1.9.1). Pursuant to the Settlement, the rate design shall be derived by maintaining the current customer charge for all rate classes (Settlement at § 1.9.2). For rate classes with only an energy component, the energy rates shall be increased to collect the increase in the revenue caused by the rate increases, such that taken together with the customer charge revenue, the total calculated revenue using 2018 normalized test year billing determinants equals the revenue requirement for the class (Settlement at § 1.9.3). For rate classes with both demand and energy rates, those rates shall be increased by the same percentage, such that taken together with the customer charge revenue, the total calculated revenue using 2018 normalized billing determinants equals the revenue requirement for the class (Settlement at § 1.9.4). For company-owned outdoor lighting, the luminaire charges will be increased by the same percentage (Settlement at § 1.9.5). Finally, the Settlement provides that pursuant to the Company’s revenue decoupling adjustment clause, the total Benchmark Revenue is $27.269 million,12 subject to adjustment to reflect the recovery of actual rate case expense associated with this proceeding (Settlement at § 1.10.1). 12 The Settlement also states that the Company shall continue to include streetlights as part of its revenue decoupling mechanism, including a street-lighting sales adjustment provision (Settlement at § 1.10.1).
Expense Allocation Certain costs and expenses presented in the Special Purpose Combined Financial Statements have been allocated by GHI management to GPS based on a basis of specific identification. When specific identification was not practicable, a proportional cost allocation method was used, depending on the nature of the expense. GHI management considers that such allocations have been made on a reasonable basis but may not necessarily be indicative of the costs that would have been incurred if GPS had been operated on a stand-alone basis for the fiscal years presented. These Special Purpose Combined Financial Statements reflect a consistent application of methodology for each reporting period presented. Allocations of corporate overhead cost from GHI unrelated to the operations of GPS have been excluded from these Special Purpose Combined Financial Statements for all periods presented.
2.22 Tenant’s Cost Allocation. The sum of the following: (a) Tenant’s Proportionate Share of Operating Costs for the year in question in excess of Tenant’s Proportionate Share of Operating Costs incurred during the Base Year; (b) Tenant’s Proportionate Share of Taxes for the year in question in excess of Tenant’s Proportionate Share of Taxes incurred during the Base Year; and (c) Tenant’s Proportionate Share of Insurance Costs for the year in question in excess of Tenant’s Proportionate Share of Insurance Costs incurred during the Base Year. If at any time during the Term Operating Costs, Insurance Costs or Taxes are not based on a completed, fully occupied, and fully assessed Project having one hundred percent (100%) of the leasable area occupied, then Operating Costs, Insurance Costs and Taxes will be adjusted by Landlord in order to fairly and reasonably approximate the variable components of Operating Costs or Taxes for such year or applicable portion thereof, employing sound accounting and management principles, that would have been payable if the Project were completed, fully assessed and one hundred percent (100%) occupied and fully assessed. If any expense included within the Operating Costs, Insurance Costs or Taxes incurred during the Base Year is thereafter reduced or eliminated (an “Expense Reduction”), then for the purpose of calculating Tenant’s Cost Allocation, the applicable Base Year amount will be reduced to reflect the Expense Reduction.
Cost allocation is a financial strategy used to assign indirect costs to different departments, projects, or products within an organization. Unlike direct costs, which can be traced directly to a specific output, indirect costs like utilities, rent, or administrative salaries are shared among various entities. Cost allocation seeks to fairly distribute these expenses according to predefined criteria such as usage, revenue, or labor hours.
You should use cost allocation when you need a clear understanding of the full costs associated with operating different segments of your organization. This is especially crucial when:
To write a cost allocation plan or document, follow these steps:
Identify Costs: Begin by distinguishing between direct and indirect costs. Only indirect costs will be allocated.
Establish Allocation Bases: Decide on a fair basis for allocation, such as square footage for rent or headcount for HR costs.
Assign Costs: Distribute the identified indirect costs according to the chosen allocation bases.
Document Assumptions: Clearly explain the rationales behind choosing specific bases and methods for allocation.
Review Regularly: Keep your cost allocation plan updated to reflect any organizational changes or shifts in operational methods.
Example:
Cost Allocation Plan for XYZ Corporation
Indirect Costs: Rent, Utilities, Administrative Salaries.
Allocation Basis:
- Rent and Utilities: Based on square footage
- Administrative Salaries: Based on labor hours
Methodology:
- Each department’s square footage divided by total square footage to allocate rent and utilities.
- Labor hours recorded for each department divided by total labor hours to allocate administrative salaries.
Contracts that typically contain cost allocation aspects include:
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