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Posted on March 28th, 2013, by

The cost allocation is very important in the contemporary business environment. The cost allocation contributes to the effective use of funds and sharing costs between different units of an organization. In the larger scope, for instance, the government spending, the cost allocation allows to share costs between different state agencies and to increase the effectiveness of using funds. In such a way, the cost allocation contributes to the optimization of cost using and funding different projects and issues.

At the same time, the cost allocation is particularly important for the public organizations and state agencies. In this respect, the US Army Corp of Engineers is one of the bodies, which does need the cost allocation because the cost allocation facilitates the financial pressure on the US Army Corp of Engineers and facilitate their operations and development of the infrastructure and facilities. At any rate, the cost allocation is one of the essential condition of the effective funding and use of costs by the US Army Corp of Engineers.

In actuality the US Army Corp of Engineers does worry about cost allocations because the cost allocations are the matter of the effective funding of the Corp and the effective use of costs. Even though, they a branch of the US Federal Government, they still need to share costs and use them effectively to fund the projects they are working on. To put it more precisely, the US Army Corp of Engineers develops and fulfils costly products. Therefore, the cost allocations are essential because, otherwise, the Corp would be unable to afford the high costs of the project the Corp is involved in. In fact, if costs are not allocated, the US Army Corp of Engineers will suffer from the high costs being spent on projects, the Corp is working on. In such a situation, the cost allocations allow the US Army Corp of Engineers to develop effective use of costs because the cost are allocated and the Corp can count for sharing costs with other Corps and military units. In fact, the US Army Corp of Engineers can use funds and spend them not only on the fulfillment of costly projects but also on other issues.

At the same time, the cost allocation may be effectively applied not only in the US Army Corp of Engineers but also in other units as well. At this point, it is possible to refer to the experience of the City of Seattle, which defines a series of costs and associated cost drivers for allocating these costs. Basically, the cost drivers or cost allocation factors defined by the City of Seattle are accurate and important for the developing of the city budget and their effective use. At the same time, these drivers were selected to focus on the key factors that define the development of the city. The city, in its turn, attempted to increase the responsibility of citizens and organizations located in the city for the funding of issues defined by the city in the list. On the other hand, it does not always make sense to have all of these individual costs and drivers identified. Instead, it should be changed. For instance, it is possible to develop a more uniform method of allocating costs, such as setting basic principles on the ground of which all allocation costs may be grouped and defined accurately. In the course of the development of the city new costs may appear. If the city has basic principles on the ground of which the costs are allocated, the city will easily group new costs and define their allocation. In such a way, the city can optimize its spending and use of funds. The government they allocate costs anyway because the costs allocation allows the city to share spending between different departments and city agencies. In such a way, the city budget is used more effectively because different agencies can use funds respectively to their needs and they have more free sources. In this regard, it is obvious that the cost allocation methods cannot be used for manufacturing companies mostly. Instead, the cost allocation may be used in different setting and may be as effective as in manufacturing companies.

No wonder that the US Department of Human Services have a special division just for cost allocation because the cost allocation is effective and helps to use funds effectively and share costs between different departments and agencies. In such a way, the cost allocation helps the US Department of Human Services can maximize the effectiveness of using funds. At the same time, the existence of the special division of costs allocation contributes to the adequate and in-time revision of the costs allocation. The latter is particularly important today, when changes occur fast in the national economy, state agencies and the contemporary business environment. Toda, the US Department of Human Services administer cost allocation for hospitals, colleges, and non-profit organizations to share costs between them and other agencies. In such a way, the department facilitates the financial pressure on hospitals, colleges and non-profit organizations that allows them to use funds more effectively and expands the scope of their operations. For instance, hospitals can hire well-qualified professionals or spend free funds on training of the personnel, whereas non-profit organizations can increase spending on their projects.

At the same time, the cost allocation is not relevant for government agencies like those above only. In stark contrast, today, the cost allocation is widely-applied in different industries and organizations, both non-profit and profit ones. In fact, the cost allocation is an effective tool to distribute costs between different departments within the organization. In such a way, organizations can ease pressure on certain units and departments that naturally opens larger opportunities for the improvement of their performance because the units get an opportunity to use available funds to meet their needs and to improve their performance. In this regard, the government agencies are not in the exclusive position. In stark contrast many organizations use the cost allocation to improve their organizational and financial performance. At this point, it is worth mentioning the fact that organizations use the cost allocation to share costs between different units that opens wider financial opportunities for each unit or department. As a result, the pressure of financial liabilities is distributed proportionally between different units and each unit covers as much costs as it can afford. Obviously, this approach is effective and, therefore, is widely-applied in the contemporary business environment as well as by non-profit organizations.

Thus, taking into account all above mentioned, it is important to place emphasis on the fact that the cost allocation is an effective tool used by many organizations to improve their financial and organizational performance. In fact, the cost allocation implies sharing costs between different units and departments within the organization. As a result, each unit and department gets larger opportunities for using funds effectively because its spending are shared with other units. In such a situation, many state agencies and the government use the cost allocation to increase the effectiveness of using funds and to improve the performance of each state y At the same time, it is not only state agencies that use the cost allocation but also non-profit organizations as well as businesses.

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