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what is cost allocation and how do you allocate costs by Department within an organization but to start with cost allocation is simply the process of identifying aggregating and assigning costs to cost objects okay so what are the costs that are being assigned first you have direct costs which are material and labor that is used in the production or value delivery process okay so these direct costs are easily allocated to whatever object you identify indirect costs are a little bit harder theyamp;#39;re things like overhead which arenamp;#39;t generally used or incurred by a particular operating unit itamp;#39;s incurred overall by the organization really just to exist so you have to allocate some portion of this cost to the different operating units that produce some level of value or output so that you can account for that cost as part of the value that you bring back in which is generated there in the operating unit okay so thatamp;#39;s cost allocation right youamp;#39;re allo
