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Cost Allocation Models
Frameworks used to assign marketing costs to different activities or segments based on their relative importance and expected returns.
Implications
Methods used to distribute indirect costs, such as overhead, across different products, departments, or projects within a company, ensuring accurate cost management and pricing.
Example
Example: A company uses activity-based costing (ABC) as a cost allocation model to allocate overhead costs based on the actual activities that drive those costs, providing more accurate product cost estimates.
Related Terms
Different from direct cost allocation, which assigns costs directly to a specific product or service, cost allocation models often deal with shared or indirect costs that need to be distributed fairly.
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