This paper documents how the University of Oklahoma developed discipline cost indices which it then used in its budget allocation process. In order to overcome the interinstitutional comparison problems between universities which use different reporting and accounting methods, discipline cost indices were derived using data collected through the Big Eight Data Exchange to permit better unit costs comparisons between academic disciplines from institution to institution. Discipline unit costs are expenditures per credit hour or expenditures per weighted credit hour. By means of a formula these discipline cost indices along with standard cost units and average cost per student credit hour were used to produce budget allocations for each department. The results were then compared with the preceding year's actual allocations for each discipline. The differences ranged from a decrease of 62.6 percent for geosciences to an increase of 22.3 percent for architecture. The explanation and verification of these discrepancies was an important part of the formula allocation process. The university did not fully implement the formula budget in the first year because of the large adjustments which would have been required. However, the process did receive wide recognition among the faculty and helped to articulate the university's strategic goals. Fourteen references and five tables are included. (JB)