Both allocation and apportionment of cost aim at identifying and assigning the cost to the cost center, but they are different. Cost Allocation is the process of assignment of cost item to the cost object, which is directly traceable.
On the other hand, cost apportionment is for those indirect cost items, which are leftover in the process of cost allocation. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Allocation is used to designate the non-business income to a specific state or local tax authority. Apportionment is used to assign the business income among the states. The allocation method applies solely to income from assets held exclusively for investment purposes.
These assets can include stock dividends, loan interest, property rents, publishing royalties and some types of capital gains. Chances are, there is a newsletter, or podcast just for you. Subscribe below to stay informed. Do you know the difference between allocating and apportioning income? Distribution Directly assigned to the department. Proportionately assigned to different departments. Application When the overhead belongs to a specific department.
When the overhead belongs to different departments. Cost Allocation, as the name suggest, is the direct allotment of cost to the traceable cost object. It is the process of associating the expenses incurred, to different departments of the organization.
When a particular cost item is easily recognizable with a cost unit, i. In finer terms, it is the full-fledged distribution of an overhead item to the department, rationally. Therefore, a process, in which there is an outright charging of whole cost items to the concerned cost center, is termed as cost allocation.
The two factors responsible for cost allocation are:. For instance : Salary paid to the employees of the maintenance department, can be allocated to that department.
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