All kinds of organizations such as manufacturing firms, service giving companies and non profit making organizations need cost allocation system. Cost allocation is affect by technology, scarcity of raw materials, differences in actual and budget cost, skilled and unskilled manpower etc. These are factors that are common in factories and industries which take inputs from highly uncertain agricultural production. Cost is an important variable that managers use to control the profitability of their organizations, and its proper allocation affects the efficiency of a certain production line or the whole organizational success. Profit making companies like Tigray Flour Share Company can be benefited from cost allocation systems that fit their structure and overall financial targets both in the short run and long run. And studying the type of cost allocation system used and its viability becomes a significant point which this paper tried to deal with. This research work was designed as a case study type with the purpose of analyzing cost allocation system in Tigray Flour Share Company. Both secondary and primary data sources were used. The overall conclusion of this study shows that there is a proper cost allocation method selected on a purpose in mind and using cause and effect criterion. As such, the poor performance observed in the company can be attributed to challenges other than its cost allocation system.