Reviewed by Anjaneyulu | Updated on Sep 28, 2020


An apportionment is the separation of sales, expenditures, or income that are then distributed to different accounts, divisions, or subsidiaries. The term is used in particular for allocating profits to a company's specific geographic areas, which affects the taxable income reported to various governments.

For example, a multi-state entity's overall revenue may be distributed to its state-level branches based on their individual revenues, headcount, asset base, or cash receipts.

Apportionment of Cost

When the cost items cannot be accurately allocated to a particular cost centre, then such items of cost are pro-rated amongst various cost objects, on an equitable basis. This is known as cost apportionment. It is the distribution of different cost items in proportions to the cost unit or cost centre on a suitable basis.

Apportionment of cost refers to the distribution of various overhead items, in proportion, to the department on a logical basis. The apportionment will share the cost among multiple cost units, in the proportion of expected benefit received.

Basis for Apportionment

The basis used for apportionment of costs is the number of cost centres when the expenses are to be shared equitably between them. This happens when an overhead can not be assigned directly to one specific cost centre.

Rent and business rates, for example, are sometimes paid by individual cost centres, and floor space is also used as a basis for apportionment to share costs between relevant cost centres.

The costs are proportionately assigned to different departments when the overhead belongs to various departments. In simple terms, the expenses which can not be charged against a specific department are dispersed over multiple departments.

For example, the wages paid to the factory head, factory rent, electricity, etc. cannot be charged to a particular department, then these can be apportioned among several departments.

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