A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or an allocation base.
An entity allocates its overhead costs on the basis of an allocation base. An allocation basis is a measurement, such as the amount of square footage occupied, kilowatt hours consumed, or machine hours used.
Cost accounting assigns overhead expenses using an allocation base. An allocation base can be a quantity, such as the amount of machine hours used, kWh spent, or occupied square footage.
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