2. COST ACCOUNTING CONCEPTS FOR IS ORGANIZATIONS › 2.5 Differential Charging › 2.5.1 Priority Accounting

2.5.1 Priority Accounting

Priority accounting is the application of a surcharge for
providing faster turnaround.  One of the common non-data
processing implementations of priority accounting is the
Postal Service's rate structure in which Express, Air, First,
Second, and Third Class Mail, respectively, represent slower
and less expensive services.

In a data processing environment, the common implementation
of service level accounting is to define turnaround
categories (in minutes or hours) with different charging
factors.  Figure 2-1 defines a simple priority or service
level scheme:


       Turnaround Limit                  Surcharge

       Less Than 10 Minutes                2X normal
       Less Than 1 Hour                  1.5X normal
       Less Than 3 Hours                 1.2X normal
       Less Than 8 Hours                 1.0X normal
       Less Than 24 Hours                .75X normal
       Less Than 48 Hours                .50X normal


 Figure 2-1.  Sample Priority Rating Factors


The reasoning behind priority accounting is that the more
time a data center has available for scheduling work, the
more likely it is to schedule it at a time when resources
would normally be idle.  Therefore, the longer the time
allowed, the lower the rate, because the additional time
allows the use of a product (the DP resource) that has a
zero shelf life.

Priority accounting systems also tend to limit peak demand
because users have an incentive to use off-peak hours.  When
the data center can spread the workload, it can reduce the
need for additional installed capacity and ensure high
utilization.  The resultant reduced unit costs for work also
tend to justify the priority accounting approach.