Form 3115 - Application For Change In Accounting Method Page 7
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Form 3115 (Rev. 12-2009)
Page
Method of Cost Allocation (Complete this part if the requested change involves either property subject
Part III
to section 263A or long-term contracts as described in section 460 (see instructions)).
Section A—Allocation and Capitalization Methods
Attach a description (including sample computations) of the present and proposed method(s) the applicant uses to capitalize direct
and indirect costs properly allocable to real or tangible personal property produced and property acquired for resale, or to allocate
and, where appropriate, capitalize direct and indirect costs properly allocable to long-term contracts. Include a description of the
method(s) used for allocating indirect costs to intermediate cost objectives such as departments or activities prior to the allocation of
such costs to long-term contracts, real or tangible personal property produced, and property acquired for resale. The description
must include the following:
1
The method of allocating direct and indirect costs (i.e., specific identification, burden rate, standard cost, or other reasonable
allocation method).
2
The method of allocating mixed service costs (i.e., direct reallocation, step-allocation, simplified service cost using the labor-
based allocation ratio, simplified service cost using the production cost allocation ratio, or other reasonable allocation
method).
3
The method of capitalizing additional section 263A costs (i.e., simplified production with or without the historic absorption
ratio election, simplified resale with or without the historic absorption ratio election including permissible variations, the U.S.
ratio, or other reasonable allocation method).
Section B—Direct and Indirect Costs Required To Be Allocated
Check the appropriate boxes showing the costs that are or will be fully included, to the extent required, in the cost of real or tangible
personal property produced or property acquired for resale under section 263A or allocated to long-term contracts under section
460. Mark “N/A” in a box if those costs are not incurred by the applicant. If a box is not checked, it is assumed that those costs are
not fully included to the extent required. Attach an explanation for boxes that are not checked.
Present method
Proposed method
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Direct material .
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Direct labor .
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Indirect labor
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Officers’ compensation (not including selling activities) .
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Pension and other related costs
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Employee benefits .
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Indirect materials and supplies .
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Purchasing costs
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9
Handling, processing, assembly, and repackaging costs
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Offsite storage and warehousing costs .
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Depreciation, amortization, and cost recovery allowance for equipment and facilities
placed in service and not temporarily idle .
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Depletion .
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Rent
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Taxes other than state, local, and foreign income taxes .
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Insurance .
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Utilities
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17
Maintenance and repairs that relate to a production, resale, or long-term contract activity
18
Engineering and design costs (not including section 174 research and experimental
expenses)
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19
Rework labor, scrap, and spoilage
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Tools and equipment .
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Quality control and inspection .
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Bidding expenses incurred in the solicitation of contracts awarded to the applicant
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Licensing and franchise costs .
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24
Capitalizable service costs (including mixed service costs)
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Administrative costs (not including any costs of selling or any return on capital) .
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Research and experimental expenses attributable to long-term contracts .
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Interest
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28
Other costs (Attach a list of these costs.)
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3115
Form
(Rev. 12-2009)
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