19.5 Brief Description of Each Method
19.5.1 Alternative Cost Method
The alternative cost of a new single purpose project is split up into two parts, namely,
the specific cost equal to that in the multi-purpose project, and the balance. The joint
cost of the multi-purpose project is then distributed in the ratio of the balance for the
different purposes. For each purpose, the respective specific cost and the relevant
allocated joint cost are summed to give the total allocated cost for the respective
function.
19.5.2 Alternative Justifiable Cost Method (AJC Method)
This method is similar to the alternative cost method, the sole difference being that
the specific cost is subtracted from the justifiable cost. The joint cost is then shared in
the ratio of the balance as in the alternative cost method and the cost allocated to each
purpose/function is worked out by adding the respective specific cost to the allocated
joint cost.
19.5.3 Bearability Concept
This concept suggests that the net revenue from the minor advantage (gross revenue
minus the operation, maintenance and depreciation on both the specific cost and
share of the joint cost of the minor advantage) shall be equal to the interest charges
on the capital investment on the minor advantage, both specific cost and share of
joint cost chargeable to the minor advantage.
19.5.4 Benefits Methods
In this method, the joint cost is distributed in direct proportion to the estimated net
benefits accruing to each function/purpose. This share is then added to the function’s
specific cost to give the allocated cost to each purpose.
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19 Cost Allocation for Infrastructure Implementation