Cost allocation, effects

We can illustrate the effect of cost allocation with the case of Old Line (refer to Table 27.4). If this company is typical, factory direct labor is the base for allocating other internal costs. This could include factory indirect, much of the clerical cost, some of the technical/professional category, and... 

Budgeting. These changes in the storage and retrieval of chemical information requite that Hbraries and information centers now consider not only what should be purchased but also what monies should be allocated for the purchase of information in nonprint formats such as CD-ROMs (compact disk read-only memory) and on-line databases. Coupled with this is budgeting for the cost of hardware and software to enable the rapid and cost-effective deHvery of needed information (15). The geometric increase in sources, both printed and on-line, has increased the role of information speciaHst as an expert in the deHvery of chemical information. Retrieval from increasingly diverse and complex sources becomes the paramount issue for searchers of chemical Hterature in the 1990s. 

Accounting is also the language of business, and the different departments of management use it to communicate within a broad context of financial and cost terms. Engineers involved in feasibihty studies and detailed process evaluations are dependent for financi information on the company accountants, especially for information on the way in which the company intends to allocate its overhead costs. It is vital that engineers correctlv interpret such information and that they can, if necessaiy, make tlie accountants understand the effect of the chosen method of allocation. 

The combination of the cost model and the optimization method will then give an augmented model from which the allocation of the component tolerances are optimized for competitive results. Optimization methods have also been extended to include procedures that select the most cost-effective manufacturing process for each component tolerance in the assembly stack (Chase and Parkinson, 1991). 

Cost-efFectiveness analysis (CEA) is concerned with ensuring that resources allocated to the treatment of mental health ptohlems ate used to maximum effect. It is usually employed to help decision-makers choose between alternative interventions available to or aimed at specific patient groups ... 

Even If the cost of estimation error cannot be quantified as this model requires, effective allocation of resources may be possible when detailed knowledge of sources of variation Is available. In this case, a replication strategy can be based on variance component and cost Information. For example, consider the problem of deciding how many samples to collect and how many analyses to perform on each sample Let... 

In general, economic inefficiency in resource allocation would be the result of a divergence between private benefits or costs and social benefits or costs, i.e. the result of externalities. Private costs (or internal costs) are directly taken by the buyer. Private costs for a transport user would, for example, include expenses for wear and tear, energy cost of vehicle use, transport fares, taxes and charges, as well as welfare effects such as own time costs. 

Intakes that exceed the ADI will not necessarily result in any adverse effect because the uncertainty factors are designed to be conservative. In practice it is probable that most people could exceed the ADI by a considerable margin before suffering any harm. Nevertheless, the probability that an individual will suffer harm (risk) increases once the ADI is exceeded and so this must be balanced against the costs of control. Conversely, the level of risk below the ADI is never quite zero because there is always a residual risk that relates to the lack of absolute certainty in the methods used for toxicological testing. In some cases no adverse end-point can be identified, such as for many naturally-occurring compounds that are widespread in foods. In such cases an ADI Not Specified (ADI NS) is allocated. 

The facility should be maintained in a way that cost-effectively controls the probability of failure-induced incidents and their likely consequences. A cost-effective maintenance program allocates maintenance resources according to the level of risk. 

At the same time an increased proportion of exports will allocate an increased proportion of annual fixed manufacturing overheads to export sales and hence a reduced proportion to UK NHS sales. The effect of this will be to reduce the cost of sales charged to the United Kingdom, with a consequent increase in profit. 

Cohen, J.P. (2006) Cost-effectiveness and resource allocation. JAMA, 295, 2723-2724. 

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