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Cost Allocation in Strategic Goals

Cost Allocation is a method to identify and distribute indirect costs. Direct costs are costs assignable to a specific cost objective, whereas indirect costs are costs incurred for multiple cost objectives or not assignable to a specific cost objective without effort disproportionate to the benefit received.

The benefits received through Cost Allocation follow the law of diminishing returns, represented by an S-Curve. In short, there comes a point where increased effort no longer results in a notable increase in precision.

How can cost allocation be used in an organization's strategic goals? Explain.

Solution Preview

Cost allocation can be used in an organization's strategic goals in several ways. Cost allocation can be used at the planning stage so that cost is properly allocated to each task in the strategic plan. The effect will be that the possibility of achieving the strategic goals will increase. Several times strategic goals are missed because of cost overruns. One of the ...

Solution Summary

This explanation gives 230 words on how cost allocation benefits can be useful to forming strategic goals. 1 reference included.

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