Allocation of overheads means the overhead relates to one production centre and is wholly attributed to that centre. True or false?

Allocation of overheads means the overhead relates to one production centre and is wholly attributed to that centre. True or false?

• A. True
• B. False
• C. Sometimes
• D. Not defined

Answer: (A)

In costing, overheads can be allocated or apportioned. Allocation is the process of charging an overhead cost to a single production centre when that cost can be traced to that centre, and the full amount is attributed to that centre. If an overhead serves more than one centre, it would be apportioned (shared) rather than allocated. So the statement is true: allocation means the overhead relates to one production centre and is wholly attributed to that centre. For example, the overhead from a machine that is used exclusively by one centre can be allocated entirely to that centre, whereas shared services like factory lighting would be apportioned across centres.

In costing, overheads can be allocated or apportioned. Allocation is the process of charging an overhead cost to a single production centre when that cost can be traced to that centre, and the full amount is attributed to that centre. If an overhead serves more than one centre, it would be apportioned (shared) rather than allocated. So the statement is true: allocation means the overhead relates to one production centre and is wholly attributed to that centre. For example, the overhead from a machine that is used exclusively by one centre can be allocated entirely to that centre, whereas shared services like factory lighting would be apportioned across centres.