Mihut, M., and N. Tomai. 2010. A Term Paper

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Mihut, M., and N. Tomai. 2010. A Cost Model for the IT Department. Journal of Applied Quantitative Methods, Vol. 5, Issue 2, pp. 358-364.

The belief that a busy IT department is profitable or at least cost effective is not true. The intent of this paper is to introduce a precise method for calculating the costs of operating an IT Department. The method described extends the cost model proposed by HP Laboratories with the activity-based costing method.

The HP cost model for planning, development, and operation of an organizations data center includes: cost of power delivery, cost of cooling, cost of space, and cost of operation.

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Brief comparison of activity-based costing with traditional costing. Benefits of ABC include: offers better way understanding various costs involved, improves performance by increasing cost visibility, provides better information to management for resource allocation, and offers competitive cost advantage.

Method of implementation: determine costs of cost of power delivery, cooling, space, and operation. Identify activities and cost drivers. Group activities into cost pools. Determine cost for each activity pool. Identify outputs.….....

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