The direct allocation method is reasonably simple to perform, though it is easier to charge off all indirect overhead as departmental expenses without allocating to cost units.

How to Calculate Direct Labor Hours & Allocation Base. Small businesses that use job-order costing systems need to determine an ... machine hours may be the best choice of allocation method.

The rules for cost allocation clearly state that similar costs, in like circumstances, must be allocated consistently as either direct costs or indirect costs. That is, costs that are normally ...

Variable costing: Consider this cost allocation method if your business has many variable cost allocations (costs that vary by quantity) and uses significant direct labor. 4. Allocate costs.