What is meant by Cost allocations?
The term "cost allocations" refers to the distribution of overhead or indirect costs across various departments, cost centers, or projects within a company. These allocations are designed to ensure a fair and transparent distribution of costs that cannot be directly attributed to a single cost center or project, such as rent, energy costs, or administrative expenses. Cost allocations are a key part of cost accounting and help in better assessing the actual profitability of departments or projects.
Typical software functions in the area of "cost allocations":
- Automatic Allocation Calculation: Automated calculation and distribution of overhead costs based on predefined allocation keys.
- Flexible Allocation Keys: Ability to set various allocation keys, such as floor space, number of employees, or revenue share, for cost allocation.
- Project-Specific Allocations: Allocation of costs to specific projects or orders.
- Allocation Tracking: Transparent tracking of which cost centers or projects bear which portions of overhead costs.
- Reporting: Detailed reports on the distribution of overhead costs to different departments or projects.
- Integration with Financial Accounting: Seamless integration of allocations into the general ledger and other financial systems.
- Allocation Simulation: Ability to simulate different allocation scenarios and analyze their impact on overall costs.
