As organization grow larger and develop, so do their structure and complexity; increasing the complexity of budgeting with it. Various departments are created to meet created requirements in operations. Integration of the separate divisions results in a sharing of resources, which then complicates overall budgeting within the organization. The resulting accepted practice to account for these costs and account for them accurately is to implement an accurate cost allocation of shared expenses. “The cost allocation is an essential part of the multipurpose planning process where cost-sharing will be required. It provides information needed to determine the magnitude and share of estimated project costs that are reimbursable. This information is essential to the tests of financial feasibility and plan acceptability. During subsequent planning and construction, it provides the information required for allocating actual expenditures and insures that cost accounts are maintained consistent with the plan formulation and allocation principles” (USACoE, 2009). With and accurate and detailed cost allocation process, funding can be tracked and analyzed throughout complex integrated processes involving numerous departments within an organization.
When considering complexity of systems and operations one needs only look to the nearest government organization. Especially in the case of the Federal government, most government organizations involve several departments sharing common resources in conjunction with each other on numerous projects. With cost allocation the funding of such projects can be tracked through the various departments and establishes a means of accountability for the transactions; allowing for overages to be identified and rectified where necessary. “From a Federal perspective, cost allocations are made to derive an equitable distribution of project costs among authorized project purposes, or those proposed for... [continues]
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