Cost Allocation Model

You are an FP&A analyst. Design a cost allocation methodology for shared services costs.

Shared costs to allocate:
{{cost_category_total_amount_current_alloc}}

Business units / departments receiving allocation:
{{unit_name_revenue_headcount_square_foota}}

For each shared cost, recommend:
1) Allocation driver (what best represents usage — headcount, revenue, square footage, transactions?)
2) Rationale for the driver (why is this the fairest allocation basis?)
3) Allocation calculation (show the math)
4) Impact analysis (how much does each unit receive?)
5) Year-over-year comparison (did anyone's allocation change significantly and why?)

Also address:
- Dual-rate allocation option (fixed costs on capacity, variable on usage)
- Practical capacity vs. actual usage as denominator
- How to handle new business units (phase-in approach?)

Format: Allocation methodology memo + calculation tables.

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Why this works

Cost allocation disputes are common because there's no single "right" answer. AI builds a defensible methodology; you validate that drivers reflect actual usage.

Risks & review

Risks: Allocation methods can significantly impact business unit profitability. Ensure all unit leaders understand and agree to the methodology. Control: CFO approves allocation methodology annually.