This workbook is designed to assist local jurisdictions and nonprofit agencies which receive transportation statewide program funds in identifying and understanding their costs of transportation. Identifying and understanding costs will enable agencies to manage their operations more efficiently and to compare their operating costs with those of other operators providing the same service. As such, this workbook provides guidance and information on two principal topics; namely, cost allocation and cost estimation. Cost allocation really means: How much does it cost to operate an existing service? This issue is important because and it deals with the distribution or allocation of total costs among funding services to the individual routes or services provided by a local jurisdiction or non-profit agency. Knowing the costs of individual routes or services is useful for management purposes and for satisfying the competitive bidding requirements mentioned in the Urban Mass Transportation Administration's Private Enterprise Policy. Cost estimation, on the other hand, really means: How much will it cost to change an existing service? This issue is important because it deals with the cost increases or decreases that will likely accompany an expansion or reduction in service. Knowing these cost impacts is useful in developing budgets for the immediate future.