Allocation Bases
Allocation bases refer to the methods or criteria used to distribute or assign costs, resources, or activities to specific cost objects or departments within an organization. These bases serve as the foundation for allocating indirect costs or overhead expenses to various products, services, or projects in order to determine their true costs and profitability. Common allocation bases include direct labor hours, machine hours, square footage, or percentage of total sales. Proper selection and utilization of allocation bases are essential for accurate cost allocation and decision-making within an organization.