Travel$ense User's Guide (PDF, 139 MB) - NBAA

178CENTRAL ALLOCATIONSTRAVEL$ENSESome corporations consolidate all of the headquarters service costs, includingthe company aircraft, and divide those costs among all the operating divisionsfor a central allocation method. There are a variety of formulas used in thismethod (e.g., a percentage of net sales, a combination of sales, profits andpayroll). Each formula has its advantages and disadvantages.If the company has established a policy for distributing other central servicecosts, the aircraft would probably fit into the pattern without difficulty. When adivision uses the aircraft, there are no costs allocated for a specific flight.Divisions that may have little need for travel or that are limited in use of theaircraft by company policy, may resist this method of cost allocation. However,the central allocation approach remains a popular alternative with manycompanies.DIRECT OPERATING COSTS ALLOCATIONEach division that has use of company aircraft is assessed the direct operatingcosts for a given flight. The company absorbs all of the fixed costs as part ofheadquarters’ operating expense. If several passengers are on board for thesame flight from more than one division, those costs may be prorated for eachindividual, so the cost of the flight is divided proportionately among thedivisions.In some cases, the company may also absorb a portion of the direct operatingcosts as part of headquarters’ expense. This arrangement may stimulate the useof the company aircraft because of the favorable cost factor. Divisions that havea budget to accommodate travel requirements can allocate company aircraftcosts against the budget.DIRECT AND FIXED COSTS ALLOCATIONEach division may bear the total cost of operating the aircraft, including costsincurred whether or not the aircraft is flown. Because fixed costs areproportionately higher than out-of-pocket expenses, this method maydiscourage use of company aircraft or limit use to divisions that have asubstantial transportation budget.FLAT MILEAGE ASSESSMENTSome companies use a flat mileage assessment of costs. A variation of this is toassess amounts that equate to commercial airline airfares between establishedairline points of service. The company bears all of the aircraft operating costs inits headquarters account and is compensated in some degree by charges todivisions.Copyright © 1999, National Business Aviation Association, Inc.