1. Identify Cost Assignment and Settlement1

2. Terminal Learning Objective
Action: Identify Cost Assignment and Settlement
Conditions: You are a Budget Analyst with access to a computer, the GFEBS training database, applicable GFEBS references, and awareness of Operational Environment (OE) variables and actors
Standards: With a minimum of 80% accuracy, learners must demonstrate proficiency with:
Determine Cost Assignment Method and Options in GFEBS
Define Secondary Cost Elements and Overhead 2

3. Associated Key Terms Assessment Assignment Method Distribution
Cost Allocation
Cost Assignment
Template Allocation
Secondary Cost Element
Direct Activity Allocation
Overhead / Overhead rate
Settlement
(1) Cost Allocation: A method of assigning costs to activities, outputs, or other cost objects. The allocation base used to assign a cost to objects is not necessarily the cause of the cost. For example, assigning the cost of power to machine activities by machine hours is an allocation because machine hours are an indirect measure of power consumption.
(2) Cost Assignment: A process that identifies costs with activities, outputs, or other cost objects. In a broad sense, costs can be assigned to processes, activities, organizational divisions, products, and services. There are two methods of cost assignment:
(a) Directly tracing costs wherever possible.
(b) Allocating costs on a reasonable and consistent basis.
(3) Assignment Methods: Cost assignment methods determine how costs flow from sender cost object to a receiving cost object.
(4) Assessment: Is a type of cost allocation that provides summary level detail of primary and secondary costs.
(5) Distribution: Is a type of cost allocation that provides line item detail of primary costs.
(6) Direct Activity Allocation: An allocation method where activity quantities are known and allocated based on a rate defined for the activity type.
(7) Indirect Activity Allocation: Is an allocation method where Activity quantities are not known. They are determined by the system based on receiving tracing factors, weighting factors, or fixed quantities. Once the quantity is entered, allocation between sender and receivers takes place.
(8) Template Allocation: An allocation method for cost centers, activity types and business processes that uses a template with weighting factors such as rates and percentages.
(9) Target = Actual Allocation: A form of indirect activity allocation, used for cost centers and business processes. In this method, actual activity quantities to be allocated are not entered directly.
(10) Overhead: Overhead is costs that are not clearly associated with specific units of a product or service; includes all costs other than direct material and direct labor. Overhead includes salaries, equipment, space, and other tasks related to headquarters management, accounting, personnel, legal support, data processing management, and similar common services performed external to the activity, but in support of the activity being competed.
(11) Overhead Rate: Overhead rates are used to assign overhead costs to an object. Overhead rates can be established on a percentage basis (e.g. share of total direct cost) or on a quantity basis (e.g. direct labor hours) assigned for an object.
(12) Secondary Cost Element: Secondary Cost Elements track the internal movement of costs, such as allocations or settlement that provide a more accurate view of where costs are incurred within the organization. Secondary Cost Elements do not have corresponding Expense Accounts in the General Ledger of costs, as well as the internal movement of those costs.
(13) Settlement: Settlements move costs from sender cost objects to receiver cost objects based on specific settlement rules.
Target = Actual Allocation
Indirect Activity Allocation

4. Cost Assignment
“The movement of costs from sender cost objects to receiving cost objects.”
During a given period costs are collected to an array of cost collectors.
At the end of the period or other designated time period, the incurred costs that have been collected are settled to their corresponding cost objects.
Allows greater visibility to which cost object is benefiting from costs incurred.
This allows the Army to better associate its costs with performance. 4

5. Cost Assignment (Cont.)
Sender
Receiver
Cost
Object
Cost
Object
Cost
Object
Cost
Object
Cost
Object
Cost
Object
Sender and Receiver Relationship is established.
Proper execution of the Cost Assignment process is essential to the accomplishment of Army objectives in GFEBS.
There may be one or multiple Receiver(s).

6. Cost Assignment Benefits
Gives a full costing view by assigning costs to the cost object which consumed the resource.
Enables users to choose the type of assignment that is most appropriate for their organization.
Enables users to set up predefined assignment rules.
Assignment or Settlement Rules
are established when the Cost
Object is created.
The Sender will be credited the
amount of the allocation and the
Receivers will be debited the
amount totaling 100%.

7. LSA #1 Check on Learning
Q1: During a given period costs are collected to an array of _____ _____. A1: Q2: As per the “Sender-Receiver” Relationship, there may multiple Receiver(s). A2:
Show Slide #7: LSA #1 Check on Learning
Facilitator's Note: Read and ask the following check on learning question and facilitate discussion on answers given.
Note: Animated slide
Q1: ____/____ is the underlying belief and principles guiding behaviors of Soldiers and civilians.
A1:
Q2: T/F: Cost Accounting translates the operational value chain into financial values
A2: 7

8. LSA #1 Summary 8

9. Secondary Cost Element
After costs have been assigned, they must be allocated to their corresponding cost object.
Tracks the internal movement of costs, such as allocations or settlement that provide a more accurate view of the beneficiary of cost.
Represent cost movement (budgetary and non-budgetary) in GFEBS. Equal to cost transfers in the Legacy System (an example is EOR 2700)
Secondary Cost Object are not automatically created within GFEBS.
Will need to be manually created as needed to support Assessments, Activity Type Allocations, Business Processes Allocations, and Settlements performed in Cost Management. .

10. Secondary Cost Elements Examples
A secondary cost element can be thought of as a “summary” cost element.
Examples:
- Assessment cost elements
- Cost elements for internal activity allocation
- Cost elements for order settlement

11. Overhead: What is It?
Is a cost that is not clearly associated with specific units of a product or service.
Includes all costs other than direct material and direct labor.
Includes salaries, equipment, space, and other tasks related to headquarters management, accounting, personnel, legal support, data processing management.
Two major categories of Overhead:
- Operations Overhead
- General and Administrative Overhead 11

12. Overhead Cost Categories
Operations Overhead
Includes costs that are not 100% attributable to the activity being competed but are generally associated with the recurring management or support of the activity.
General and Administrative Overhead
Includes salaries, equipment, space, and other tasks related to headquarters management, accounting, personnel, legal support, data processing management, and similar common services performed externally to the activity but that support the activity being completed.
Overhead Rates: Overhead rates are used to assign overhead costs to an object. They can also be established on a percentage basis (e.g. share of total direct cost) or on a quantity basis (e.g. direct labor hours) assigned for an object. 12

13. Cost Assignment Methods
Assessment
Distribution
Direct Activity
Allocation
Indirect
Activity
Allocation
Template
Allocation
Target=Actual
Allocation
Highlighted in dark blue indicates functionalities that the Army is
presently using and the lite blue indicate future use.

14. Assessment
A method of assigning both primary and secondary costs in Cost Center Accounting.
Using Assessments are helpful when the user would only like to see a summarized view of the costs.
Example of Assessment: Department of Logistic (DOL) Food Services Division and its dining facilities. .

15. Assessment (Cont.) .
The sender/receiver relationship defined here would have the DOL Food Services Division charge a percentage of its operating costs to the Unit or Brigade based on that Unit or Brigade’s use of the dining facilities.
The Allocation Basis (SKF) used for this distribution would be “Headcount.”
Each Unit or Brigade would receive a portion of the total operating cost based on the number of soldiers using the dining facilities.

16. Distribution
In this distribution scenario, IMCOM would be sending line item detail of Primary Cost to three receiving cost centers.
Sender Cost Center: IMCOM
Receiving Cost Centers: R&D MEDCOM, R&D ATEC, and Schools MEDCOM all reside in the same IMCOM facility.

17. Distribution (Cont.)
The distribution would post facilities charges as separate line items, citing costs for elements such as labor, utilities, and rent.
The Allocation Basis (SKF) used for this distribution would be “Square Feet.”
Instead of one aggregated posting for facilities charges, each cost is posted separately.
We would still use square feet as our allocation basis, but instead of one aggregated posting for facilities charges, each cost is posted separately.

18. LSA #2 Check on Learning
Q1: Assessment is a method of assigning both _____ and _____ costs A1: Q2: T/F: Secondary Cost Object are automatically created within GFEBS. A2:
Show Slide #18: LSA #2 Check on Learning
Facilitator's Note: Read and ask the following check on learning question and facilitate discussion on answers given.
Note: Animated slide
Q1: Assessment is a method of assigning both _____ and _____ costs
A1:
Q2: T/F: Secondary Cost Object are automatically created within GFEBS.
A2: 18

19. LSA #2 Summary 19

20. Conduct Practical Exercises20 20

21. Walkthrough: Display Actual Assessment
Transaction Code: KSU3
Conduct Practical Exercise 9.1
Use this procedure to display an Actual Assessment Cycle.
Assessments are use to allocate costs via Secondary Cost Elements.
When allocating costs by using assessments, the detail in the
sending entries is not shown. The target will only show the
assessment cost element and amount.

22. Walkthrough: Display Actual Distribution Cycle
Transaction Code: KSV3
Conduct Practical Exercise 9.2
Use this procedure to display an actual distribution cycle.
A distribution is a type of cost allocation that provides line item
detail of primary costs. When allocating costs using distributions,
the detail of the primary cost elements is shown. 22

23. LSA #2 Check on Learning
Q1: What Is a method of assigning costs to activities, outputs, or other cost objects?
A1:
Q2: What Is a type of cost allocation that provides line item detail of primary costs?
A2:
Q3: What does Cost Assignment allow?
A3:
Q1: What Is a method of assigning costs to activities, outputs, or other cost objects?
A1:
Q2: What Is a type of cost allocation that provides line item detail of primary costs?
A2:
Q3: What does Cost Assignment allow?
A3:
Facilitator’s Note: Additional questions to ask the students;
Q: What type of costs would an organization want to assign out to cost objects? A:
Q: What is the difference between an Assessment and Distribution?
Q: What does Operations Overhead include
Q: What do Secondary Cost Elements track?
Q: When the cost posted on Internal Orders are settled back to other objects in GFEBS, it is based upon?
Q: What are Internal Orders used for? 23

24. LSA #2 Summary 24

25. Questions? 25

26. TLO Summary Action: Identify Cost Assignment and Settlement
Conditions: You are a Budget Analyst with access to a computer, the GFEBS training database, applicable GFEBS references, and awareness of Operational Environment (OE) variables and actors
Standards: With a minimum of 80% accuracy, learners must demonstrate proficiency with:
Determine Cost Assignment Method and Options in GFEBS
Define Secondary Cost Elements and Overhead 26