COST allocation

Question 1

The basis that is used to allocate costs to cost objects (i.e. the number of material receipts in our
example) is called an allocation base or cost driver.

Answer 1

Where allocation bases are significant determinants of costs the terms
cause-and-effect allocations or driver tracing are used

Question 2

Where a cost allocation base is used that is
not a significant determinant of its cost, the term arbitrary allocation is used