if you have garage on the 3rd floor who would come for services.

Valuable allocation expenses are to be kept at a minimum.

It helps the business or the organization to know how money is inflow and outflow departmentally.

What is the importance of arbitrary allocation of expenses when they are not related to sales and worst still they are not planned(expenses)?

Which one is the more value leve in the allocation of expense at the top level or at the ground level on the floor?

Allocation of expenses between departments is intended to assist in providing information about the contribution of each department to the earning of profits but this objective will not be achieved unless the allocation provides a good approximation of the true cost involved

Arbitrary allocation of expenses

Accounting -> Arbitrary allocation of expenses Arbitrary allocation of expenses Allocation of expenses between departments is intended to assist in providing information about the contribution of each department to the earning of profits but this objective will not be achieved unless the allocation provides a good approximation of the true cost involved. Sales may be the basis for the allocation of expenses, however, the expense has to be directly linked to sales. Floor space is another way of allocating expense. However, the following example indicates the problem in using that as a basis for expense allocation. Two departments may have equal floor space yet one department is on the top floor and the other is at ground level. The ground level location has more chance of gaining from passing traffic, people browsing and so on, and so would be a more valuable location.

Course is understood.

What is an arbitrary allocation of expenses?