Importance of Accurate Cost Allocation: Successes or Failures

Importance of accurate cost allocation
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Importance of accurate cost allocation
Accurate cost allocation is a precise or exact allocation of the cost of resources in an organization including operational costs and all that makes it achieve the set goals. Accurate cost allocation is a necessary task for any organization as it enables the provision of accurate costs, enhances the use of resources, and controls the limited resources. The importance of accurate cost allocation are several in an organization such as enhancement of the quality of financial reports, improves the internal decision making in an organization, and enables the effective use of resources especially the limited resources. Also, accurate cost allocation enables easy cost approximation, fewer cases of complexity in inaccurate approximations, and it saves time in tracking the costs in the organization departments (Marquis, 2008).
For instance, an organization like a hospital requires accurate cost allocation for effective management and service delivery. One real life experience on success due to accurate cost allocation is the Texas Women Health Program That offers free health services to women from low-income families in Texas. As usual, the program faces many challenges that have led to a dispute between the state government and the Federal government. The current disputes in policies governing medical services for women in Texas are mainly funding of the women's health program but due to accurate cost allocation, the program ha...