Tips & Tricks Video: Spread Allocation Item Value Weighting


Use spread allocation item value weighting to distribute overheads or indirect costs

It’s a good idea to understand the two different Spread Allocation Weighting methods, so that you can choose the best option depending on what you’re doing.

Let’s go over the Item Value Weighting.

Allocations are one of many options you have for spreading overhead or indirect costs across a project. When allocating an overhead item to multiple direct cost items, ‘Weighting’ determines how the overhead will be spread. The default setting for weighting is ‘Item Value’.

Item value will only allocate spread when a percentage amount is entered into the ‘Total Percentage Allocated’ column. This allows you to specify what percentage of the overhead item’s value you would like allocated to the selected items.

In this example, let’s select 100% of the Supervision overhead item to spread across two of the direct costs.

The information at the top lets you know which overhead line number you are working on and how many items you are allocating to.  When you carry out the allocation, you simply need to check these boxes to select the direct cost items and press the ‘Save’ button.

During the spread calculation, the overhead item will be spread across the selected direct cost items proportionally, based on the direct cost item’s estimated total.

In this simple example, with a Weighting of 100%, by selecting these two items, there will be a 40% 60% split of the Supervision overhead cost allocation between these 2 items.

Because we are using the accuracy of First Principles, we build an estimate up from resources used, to get to the estimated total value, instead of working top down from a set total amount.

That is why the weighting is proportionally spread based on the estimated total of the selected items.

So the overhead item will be spread 40% to this item and 60% to this item. The amount allocated will appear in the Indicative Allocated Value column.  The allocated value is indicative because it hasn’t taken into consideration the rounding that occurs during the final spread calculation.

This column shows you the percentage you are allocating and this column you the corresponding allocated value.

And that’s an introduction to Spread Allocation Item Value Weighting in Expert Estimation.