Allocation Methods

Allocation methods refer to the strategies used to distribute resources, costs, or benefits among different areas, groups, or projects. In business, for example, it’s how costs are divided across departments or products, ensuring equitable sharing based on usage or contribution. Common methods include direct allocation, where costs are charged specifically to a department, and indirect allocation, where costs are distributed based on a formula, like usage or revenue. These methods help organizations understand their financial health, make informed decisions, and improve efficiency by clearly defining how resources are utilized.