Allocation differs from apportionment because allocation:
ASums all overheads
BSplits the item among centres
CRe-charges service centre cost
DCharges the whole item to one cost centre
Answer & Solution
Correct answer: D. Charges the whole item to one cost centre
1. Allocation is the direct assignment of an entire cost item to a single cost centre when it pertains wholly to that centre.
2. Apportionment, in contrast, distributes a shared cost item across several cost centres on a chosen basis.
3. Allocation requires no splitting because the cost is uniquely identified.
4. Hence allocation charges the whole item to one cost centre.
_Source: ICAI BoS Inter Paper 3, Ch 4 "Overheads", §4.3 ¶2_
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