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The cost allocation proposal is a written document that summarizes the procedures and the methodologies used by an organization for allocating costs to grants and programs. It is basically prepared for the internal clients which are your employees and managers working for the organization. Different costs are allocated to a different set of divisions by the organization depending on the level of output outlaid by the organization. The cost allocation proposal has four main objectives:

• Encourage managers and employees
• Know the cost of goods sold and the cost of inventory.
• Realize the economic effect of planning and control decisions
• Provide justification for pricing and reimbursement.

The purpose of making a cost allocation proposal is to help organizations make the right decision, reduce waste, and determine the price of their products. It proves helpful because the cost is distributed in individual items whether being a direct or an indirect expense for the company.