COST REALLOCATION

Cost Reallocation

Cost Reallocation

Introduction

KCOM group is a British based communication company, previously known as Kingston's Communications. The company is leading provider of information technology services in the united kingdom with it is headquartering at Kingston upon Hull. The company is listed in the London stock exchange and, it has been a part of the FTSE100 index in the past. The underlying article “How to create a system for charging back IT services” is based on the significance of IT departments and their contribution towards the company's performance. The article has discussed the KCOM Group project which provided the KCOM with a flat-fee structure and enabled the company to allocate the costs to their respective heads in effective and efficient manner. The project enabled the company to set a daily rate charges irrespective of their length and seniority (Dean, 2010). The implementation of the modernist project targets the information technology department to breakeven. The marking of daily basis services have become easier and, it has created ease for the finance department to split the cost accordingly which is based on the head counts.

Discussion

The current prevailing economic turmoil has raised different question over the cost allocation of the IT infrastructure companies. The companies are faced with the challenge to allocate the cost and realize them in a timely manner. The activity based accounting is a one method that provides with a solution for these problems and differentiates actual cost from actual profit. Currently most of the companies cannot bear, the cost associated with this type of costing system and it will act a burden for the companies already facing a financial crunch (Dean, 2010). Therefore, in order to operate and run a granular system, different resources are required such as time and staff which does not seem to be an effective way of doing it.

Process of Allocation of IT Cost

Such as the KCOM Group project IT has adopted a flat structure in order to avoid undesired and unnecessary overheads and operate smoothly in a coherent manner. The process allocates the respective cost irrespective of the length of the project, whoever is involved and, sets a daily charge regardless of seniority and, specialism and it provides with the target for the IT department to breakeven. The process provides with ease in charging for day to day services and makes them simple. It collects the identifiable and known costs such as maintenance; license and the ...