Cost Allocation

Allocation of cost, implies the entire distribution of the overhead item to the departments on a logical basis. It represents that part of cost attribution, which charges a particular cost to a cost unit.

Allocation of cost is directly assigned to the particular cost center.

Cost Allocation, as the name suggest, is the direct allotment of cost to the traceable cost center. 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.e. product, or cost center, then these costs are charged to the concerned cost center or unit, and the process is called as cost allocation. In finer terms, it is the full-fledged distribution of an overhead item to the department, rationally.