Which statement describes apportionment?

Which statement describes apportionment?

• A. Allocation is when overheads can be identified and charged to a department.
• B. Apportionment is when overheads can be allocated to a single department.
• C. Apportionment is when overheads cannot be identified but are shared between departments using a basis.
• D. Absorption is the process of dividing service department costs.

Answer: (C)

Apportionment deals with overheads that can’t be traced to a single department. When a cost is indirect and benefits several departments, it’s divided among those departments based on a fair basis—such as floor space, number of staff, or machine hours. This distinguishes it from allocation, which applies to overheads that can be identified with a specific department, and from absorption, which takes service department costs that have been apportioned and charges them onto production departments as part of product costing. So, the statement describes apportionment correctly: the overheads can’t be identified with one department and are shared across multiple departments using a chosen basis.

Apportionment deals with overheads that can’t be traced to a single department. When a cost is indirect and benefits several departments, it’s divided among those departments based on a fair basis—such as floor space, number of staff, or machine hours. This distinguishes it from allocation, which applies to overheads that can be identified with a specific department, and from absorption, which takes service department costs that have been apportioned and charges them onto production departments as part of product costing. So, the statement describes apportionment correctly: the overheads can’t be identified with one department and are shared across multiple departments using a chosen basis.