The Central Valley Project

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The Central Valley Project (CVP) is a Federal water project set up and run by the US Bureau of Reclamation to provide water for the Central Valley in California. Through twenty dams and reservoirs the CVP facilitates the collection and delivery of water for irrigation, municipal, and industrial use, as well as producing hydropower, providing flood control and recreational facilities on their reservoirs. The CVP provide a good example of how cost allocation works within a vast organization. I will use this organization to describe the method used by the CVP to allocate cost and whether I agree or disagree with their methods. I will also be identifying situations where common costs are allocated. I will explain the impact of allocating common costs on internal decision making and the consequences of not allocating common costs for internal decision making. Finally I will explain how decision making in this organization is affected by the way costs are allocated. The CVP is an organization comprised of many different facilities and functions, as described in the above paragraph, so they must have a method for allocating costs and calculating repayment responsibilities for each feature within the CVP. They must accomplish this in a way that is in compliance with authorizing legislation, regulatory requirements, interagency agreements and policy guidelines. To accomplish this task they use a three step cost computational process. The three steps in the plan areas follows; Identify costs to be allocated, allocate costs to project purposes and then calculate repayment responsibilities for each project purpose. The first step of this process is to identify costs to be allocated. To accomplish this task they have grouped these casts into six categories. The first cost identified is Single-Purpose Facilities which are facilities that serve a single purpose, such as water supply purpose or power purpose. The second cost recognized is Multi-Purpose...
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