Question

The process of attributing proportions of items of costs amongst cost centres is called________.

• A. Overhead absorption
• B. Absorption of indirect costs
• C. Cost apportionment
• D. Cost allocation

Answer 1

Answer: (C)

Cost apportionment

The distribution of overheads to several department or cost center proportionately on some equitable basis is known as apportionment of overheads.

For example, canteen is a service cost center which provides services to all other cost centers. Overheads of canteen department can be apportioned to the other department in number of employees basis.