Basis of allocation: Departmental Accounting

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.

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