Q.Explain allocation of overheads.

Lighting is apportioned on the number of light points — option (b).

Apportionment uses an equitable basis that reflects how each department causes the cost. Lighting cost depends on how many light points (bulbs/fittings) a department has, so the number of light points is the fair basis. (If metered area is used, floor area may apply, but among the given options the number of light points is the standard CHSE +2 answer.)

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Rent is apportioned on the basis of floor area occupied.

When an overhead is common to several departments, it is shared out (apportioned) using a basis that reflects the benefit each department derives.

• Rent, rates, heating, lighting, building repairs → apportioned on floor area / space occupied, because the charge arises from the premises used. ✓ …

Correction: "allocation" → apportionment.

The key difference:

• Allocation = charging the whole of an item of cost that is directly identifiable to one cost centre (e.g. a department's own supervisor's salary).
• Apportionment = distributing a proportion/part of a common item of cost over several cost centres on a suitable basis (e.g. rent over departments by floor area). …

The correct option is (c) Allocation.

• Allocation — charging the whole of an overhead item directly to one cost centre that caused it (e.g. a machine's own repair bill to that machine's cost centre). This matches "allotment of overheads to a cost centre."
• Apportionment — splitting a common overhead among several cost centres on a suitable basis. …