Cost apportionment

Cost apportionment is sharing one overhead cost that benefits several cost centres between them on a fair basis, such as splitting rent by floor area, as distinct from allocation, which charges a cost wholly to one centre.

ByHoang TruongUpdated July 5, 2026

See it move

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Cost apportionment shares an overhead that benefits several cost centres between them, using a fair basis. Brindley Warehousing apportions €48,000 of rent by floor area: Receiving (1,200 m²) and Dispatch (1,200 m²) each get €12,000, while Storage (2,400 m²) gets €24,000, the three shares summing back to €48,000.

Where it fits

SubjectCost AccountingCoreTopicOverhead Allocation & ABCCore

The formula

LaTeX

C_X = OH \times \dfrac{B_X}{\sum B}

Variables

$C_{X}$: Overhead apportioned to centre X (€)
$O H$: Total overhead to be apportioned (€)
$B_{X}$: Centre X's value on the apportionment basis (e.g. m²)
$\sum B$: Total basis value across all centres (e.g. m²)

The basis (floor area, machine value, employee headcount, etc.) is chosen to reflect how much each centre actually benefits from the shared overhead.

Check yourself

PracticeCORE

Castellan Foods pays €36,000 a year in building insurance for a factory shared by two departments: Mixing (900 m²) and Packing (2,100 m²), a total of 3,000 m². The insurance is apportioned by floor area. How much is apportioned to Packing?

Select an answer to check your understanding.