Cost allocations relevant for Corp of Engineers
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US Army Corps of Engineers - Walla Walla Project retrieved May 25, 2009 from: http://www.nww.usace.army.mil/lsr/reports/misc_reports/allocate.htm
City of Seattle Budget for 2009 - 2010 retrieved May 25, 2009 from: http://www.cityofseattle.net/financedepartment/0910adoptedbudget/Cost_A llocation_2009_Adopted_and_2010_Endorsed_Budget.pdf
US Department of Human Services, Financial Accounting, Division of Cost Allocation retrieved May 25, 2009 from: http://rates.psc.gov/
1. Why does the US Army Corp of Engineers worry about cost allocations? Aren't they a branch of the US Federal Government? Why does it matter whether or not costs are allocated?
2. The City of Seattle reading lists a series of costs and associated cost drivers for allocating these costs. Do you agree with the cost drivers (cost allocation factors)? Why do you suppose these drivers were selected? Does it make sense to have all of these individual costs and drivers identified or should there be a more uniform method of allocating costs? Why do they allocate costs anyway in a government (City Government) setting -- aren't cost allocation methods mostly for manufacturing companies?
3. Why does the US Department of Human Services have a special division just for Cost Allocation? What are some of the ways in which they adminster cost allocation for hospitals, colleges, and non-profit organizations?
4. Is cost allocation only relevant for government agencies like those above? Why or why not? Support your arguments with references or examples as appropriate.
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Solution Summary
The solution examines cost allocations relevant for Corp of Engineers in Seattle.
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Question 1
The US Army Corp of Engineers worries about cost allocation as within the organization each project or division is allocated a budget to work on. To properly monitor the true expenditure of a project or a unit of the US Army Corp of Engineers, costs of the operations of shared activities such supervision need to be allocated. The true expenditure of a project or division includes the total direct and indirect costs.
Moreover, according to the Walla Walla District project of the US Army Corps of Engineers, cost allocation results to the "equitable distribution of project costs among authorized project purposes" (US Army Corps of Engineers). Furthermore, cost allocation is necessary to "determine the magnitude and share of estimated project costs that are reimbursable" (US Army Corps of Engineers). Hence, because it is a branch of the US Federal government the US Army Corps of Engineers needs to allocate ...
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