Determining Highway Maintenance Costs (2011) / Chapter Skim
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From page 20... ...
; • An allocation of maintenance program support expenditures; and • An allocation of enterprise support program expenditures. The full cost calculation requires an in-depth understanding of agency organization, activities, and financial and other information that goes beyond the maintenance program.
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Step 1 Gather and Classify Maintenance Program Activities and Expenditures Step 2 Allocate Maintenance Support Expenditures to Line Activities Step 3 Gather and Classify Enterprise Programs and Expenditures Step 4 Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Step 5 Combine Cost Categories to Derive Full Cost
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The other key consideration for this step is selecting the basis by which each support activity expenditure is allocated to the line activities. The benchmark approach allocates support activity expenditures to all supported line activities on the basis of the line activity costs identified in Step 1.
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The support activity allocation is equal to: Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $SAIQ = cost of support activity in question. For example, the allocation of the mix deicer support activity to deicing equals 3.3 Step 3: Gather and Classify Enterprise Programs and Expenditures Objective The objectives of Step 3 are to collect information on all enterprise programs and expenditures and to classify them as line, support, or special/pass-through.
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3.4 Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Objective The objective of Step 4 is to establish the relationship between enterprise support and line programs in order to allocate an appropriate portion of enterprise support expenditures to the maintenance program. Sources of Information and Key Considerations The best source of information regarding the relationships between enterprise support and line programs is the agency's personnel.
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At this point, the process has identified the line activity expenditures, an allocation of maintenance program support expenditures for each line activity, and the allocation of enterprise support expenditures that must be applied to the maintenance program. The next step, therefore, is to allocate the maintenance program share of enterprise support expenditures to the line activities themselves.
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For example, sign shop activities not recouped through sign material expenditures support only sign installation and maintenance activities. The second type of support expenditure 26 Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Crack sealing $500,000 $54,775 $36,076 $590,851 Deicing $10,000,000 $1,345,506 $721,525 $12,067,031 Sign washing $300,000 $32,865 $21,646 $354,511 Striping $7,000,000 $766,854 $505,067 $8,271,921 Total $17,800,000 $2,200,000 $1,284,314 $21,284,314 Table 3.7.
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Example simplified allocation of support activity expenditures to line activities. Line Programs Allocation of Support Program Expenditure Total Support Program Allocation Program Delivery Support Administration Maintenance $470,588 $784,314 $1,254,902 Construction $2,352,941 $3,921,569 $6,274,510 Traffic operations $58,824 $98,039 $156,863 Public transportation $117,647 $196,078 $313,725 Total $3,000,000 $5,000,000 $8,000,000 Table 3.10.
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Where $LAIQ = line cost of line activity in question, $ALA = line cost of all line activities, and $AESM = allocation of enterprise support to the maintenance program. Using the simplified benchmark approach, now the allocation of the enterprise support to sign washing equals Table 3.12 presents the full unit costs for production of each of the line activities in the example using the simplified benchmark approach.
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Allocation Basis Step 3: Allocate Maintenance Support Expenditures to Line Activities In order to help ensure the practicality of the full cost determination process, both the benchmark and simplified benchmark approaches described and illustrated in this report consistently use the line cost as the basis for allocating all program support expenditures to line activities. However, an agency may choose a different basis for allocating all program support expenditures, or even choose different bases for different support activities.
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Step 5: Combine Cost Categories to Derive Full Cost All allocations of enterprise support expenditures to line activities so far have been made on the basis of the line activity expenditures identified in Step 1. However, alternative approaches to allocating the maintenance program's share of enterprise support expenditures can be considered in much the same way as has been discussed for Steps 2 and 4.
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From page 31... ...
, provided that the requisite portion of total line expenditure and accomplishment data for a particular maintenance activity can be readily identified. The approach for allocating program and enterprise support expenditures to a subset of total line activity expenditure is no different than to the statewide line activity total -- that is, based on the line cost amount.
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From page 32... ...
This is particularly important in the area of oil and petroleum products, which are important to most maintenance activities in that they drive the price of the fuel that is used by all of the equipment. For this reason and depending on the purpose of determining the agency's full cost for performing a particular line activity, it will be important to ensure appropriate consideration for inflation and apply a factor to the resulting full unit cost.
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