Different basis of allocation
Sl No. Cost Basis of allocation 1 Interest (i) Total Capital Employed in in the Department (ii) Square feet of the area occupied (iii) Ratio to Sales 2 Insurance (i) Square feet of the area occupied. (ii) The total value of each asset 3 Taxes (i) Ratio to sales (ii) Basis of tax 4 Rent (i) Ratio to sales (ii) Square feet of area occupied (iii) No of hours of operation 5 Depreciation (i) Square feet of area occupied (building) (ii) Value of the asset (iii) Life of the asset 6 Telephone (i) Dept. Metered Usage (ii) No. of extension sanctioned (iii) Ratio to sales
7 Employee’s Benefit (i) No. of employees (ii) Refer to payroll record 8 Advertisement (i) Ratio to sales 9 Light & Power (i) No. of light/power points (ii) Cubic feet of area occupied (iii) No. of hours dept. operate (iv) Ratio to sales
The above-mentioned basis of allocation are some of the basis recommended but a management may adopt altogether a different base for allocation of indirect cost to the different department.
