The Usage-Based Allocation Model allocates costs to each department based on their actual usage of
the cloud-based platform. This model ensures that each department is charged only for the services it
uses, making the cost allocation fair and accurate. Therefore, the Usage-Based Allocation Model is the
most suitable cost allocation model for the company's scenario.
Explanation for each answer:
• Headcount Allocation Model
o The Headcount Allocation Model allocates costs based on the number of employees in each
department, without considering their usage of the cloud-based platform. This model can lead to
overcharging some departments and undercharging others, making the cost allocation unfair and
inaccurate.
60/217
• Fixed Allocation Model
o The Fixed Allocation Model allocates costs to each department based on a fixed percentage of the
total cost, regardless of their usage of the cloud-based platform. This model can lead to overcharging
some departments and undercharging others, making the cost allocation unfair and inaccurate.
• Usage-Based Allocation Model
o The Usage-Based Allocation Model allocates costs to each department based on their actual usage of
the cloud-based platform. This model ensures that each department is charged only for the services it
uses, making the cost allocation fair and accurate. Therefore, the Usage-Based Allocation Model is the
most suitable cost allocation model for the company's scenario.
• Departmental Allocation Model
o The Departmental Allocation Model allocates costs to each department based on their budget, without
considering their actual usage of the cloud-based platform. This model can lead to overcharging some
departments and undercharging others, making the cost allocation unfair and inaccurate.
• Activity-Based Allocation Model
o The Activity-Based Allocation Model allocates costs to each department based on the actual activities
performed by each department, regardless of their usage of the cloud-based platform. This model is not
suitable for cloud-based platforms as it does not consider the actual usage of resources by each
department.
Cost allocation models are used to distribute costs among different departments or business units within
an organization. These models can be essential in ensuring that each department is only paying for the
services they are using, making the cost allocation fair and accurate.
The most suitable cost allocation model depends on the nature of the services, the structure of the
organization, and the desired level of granularity. In the scenario presented, the Usage-Based Allocation
Model is the most suitable as it allows for accurate and fair allocation of costs to each department based
on their actual usage of the cloud-based platform.
