Cost Allocation and ApportionmentCost Allocation:
Certain items of overhead costs can be directlyidentified with a particular department or cost centreas having been incurred for that cost centre.Allotment of such costs to departments or costcentres is known as allocation. Thus, allocation may be defined as “the allotment of whole items of costcentres or cost units.”A point to be understood is that allocation can bemade only when exact amount of overheads thatresult solely from the existence of that cost centre.In brief, in order that an overhead can be allocated , itshould meet both of the following conditions:(a)The cost centre must have caused the overheadto be incurred.
The exact amount incurred in a cost centre
must be known.
Certain overhead costs cannot be directly chargedto a department or cost centre. Such costs arecommon to a number of cost centres or departments and do not originate from any specificdepartment. Distribution of such overhead costs tovarious departments is known as apportionment.