What Is The Difference Between Allocation And Apportionment?
This article differentiate allocation and apportionment of overheads:
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Allocation Of Overheads: |
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Is to directly and specifically charge the overheads to the cost center. Two basic conditions exist before we can consider it as allocation:
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Apportionment Of Overheads: |
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Where the overheads cannot be specifically identifiable to the specific cost unit center. Hence the need to find suitable basis to charge the various cost unit with a fair share of the overheads.
Illustration:
Types of Overheads Basis of apportionment
Rent, rates, water and utilities By Area
Office salaries, canteen, supervision By Number of employees
Depreciation of fixed assets Cost/book value
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Doesn’t that definition of allocation mean that it’s not an overhead but a direct cost?!
as direct cost can be specifically identified, it is without saying an allocated cost.
What it’s mean is :
say if you wants to charge labour overheads of $1000 to several cost centers. If you can specifically identify it to say cost center A (based on the abovementioned two criteria)then this whole $1,000 is fully allocated to cost center A otherwise it has to be apportioned by no of employees(example) in cost center A over Total no of employee of all the cost centers.
Hopes this helps!