(a) The following table lists some typical pools, together with illustrative allocation bases, which could be used in appropriate circumstances:
| Home office expense or function
| Illustrative allocation bases
|
|---|
| Centralized service functions:
| |
| 1. Personnel administration | 1. Number of personnel, labor hours, payroll, number of hires.
|
| 2. Data processing services | 2. Machine time, number of reports.
|
| 3. Centralized purchasing and subcontracting | 3. Number of purchase orders, value of purchases, number of items.
|
| 4. Centralized warehousing | 4. Square footage, value of material, volume.
|
| 5. Company aircraft service | 5. Actual or standard rate per hour, mile, passenger mile, or similar unit.
|
| 6. Central telephone service | 6. Usage costs, number of instruments. |
(b) The selection of a base for allocating centralized service functions shall be governed by the criteria established in 9904.403-50(b).
(c) The listed allocation bases in this section are illustrative. Other bases for allocation of home office expenses to segments may be used if they are substantially in accordance with the beneficial or casual relationships outlined in 9904.403-40.
| Home office expenses or function
| Illustrative allocation bases
|
|---|
| Staff management or specific activities:
| |
| 1. Personnel management | 1. Number of personnel, labor hours, payroll, number of hires.
|
| 2. Manufacturing policies, (quality control, industrial engineering, production, scheduling, tooling, inspection and testing, etc | 2. Manufacturing cost input, manufacturing direct labor.
|
| 3. Engineering policies | 3. Total engineering costs, engineering direct labor, number of drawings.
|
| 4. Material/purchasing policies | 4. Number of purchase orders, value of purchases.
|
| 5. Marketing policies | 5. Sales, segment marketing costs.
|
| Central payments or accruals:
| |
| 1. Pension expenses | 1. Payroll or other factor on which total payment is based.
|
| 2. Group insurance expenses | 2. Payroll or other factor on which total payment is based.
|
| 3. State and local income taxes and franchise taxes | 3. Any base or method which results in an allocation that equals or approximates a segment's proportionate share of the tax imposed by the jurisdiction in which the segment does business, as measured by the same factors used to determine taxable income for that jurisdiction. |