How to choose a basis of apportionment
Floor area, machine value or headcount: pick the basis that matches what drives each overhead, then work out each department's share.
Task 1Match the basis to the cost4 questions
The basis should reflect what causes the cost. A bigger space costs more to rent, so rent follows floor area.
| Overhead | Usual basis |
|---|---|
| Rent | Floor area |
| Heating and lighting | Floor area |
| Machinery insurance | Value of machinery |
| Canteen costs | Number of employees |
| Power for machines | Machine hours |
No basis is perfect. Choose the fairest one that can be measured, and use it the same way every year.
Task 2Work out each share3 questions
Task 3The overhead analysis2 questions