Question

A process in which the charging of whole items of costs to suitable and identifiable cost centres or cost units is called ___________.

• A. Apportionment
• B. Classification
• C. Absorption
• D. Allocation

Answer 1

The correct option is D Allocation

Cost allocation is the process of identifying, aggregating and assigning the cost to the respective cost center.

It is a method by which non identifiable item of cost to be allocated to the respective cost center or unit on a consistent, fair and equitable basis.

For example, cost of canteen service can be allocated on each cost center on the basis of number of employees.