Direct vs indirect allocations
Direct allocations are based on consumption. Indirect allocations are based on a selected ratio such as Total Staff by Department.
Direct costs
Direct costs can be assigned to a specific product, department, or project. Labor, software, equipment, and raw materials are examples of direct costs. Direct costs can be identified with a specific cost object. A large percentage of direct costs come from labor and materials.
Indirect costs
Indirect costs generally include the infrastructure that keeps a company running. Indirect costs can include items such as cleaning supplies, utilities, office equipment rental, desktop computers, and cell phones.
How direct and indirect costs are applied to the Apptio cost model
The direct and indirect costs are calculated at the top of the cost model using four objects: Business Services, Service Allocations Direct, Service Allocations Indirect, and Business Units Allocation. The model is shown below.
The Business Services costs are allocated to the Service Allocations Direct model object based on the Service_Service Allocations Direct field. The field is in the All Business Services data set backing the Business Services model object, and in the Service Allocations Direct Master data set backing the Service Allocations Direct model object.
The Business Services costs are allocated to the Service Allocations Indirect object based on the Check for SAD field. The field is in the All Business Services data set backing both the Business Services model object and the Service Allocations Direct model object.