actual sales are used as the allocation base identify with explanations

Expert Solution

ALLOCATION BASE

An allocation base is the basis upon which an entity allocates its overheadcosts. An allocation base takes the form of a quantity, such as machine hours used, kilowatt hours consumed, or square footage occupied.

EXPLANATION FOR BASIS OF ACTUAL SALES

Businesses incur both direct and indirect costs when producing products. Direct costs include the labor and materials that immediately went into creating the particular item for sale. Indirect costs include other necessary expenses such as rent and infrastructure. Businesses must cover these indirect expenses in order to operate, but they are not directly connected to the process of creating any individual item. Revenue allocation is the process of accounting for these extra expenses when calculating the actual cost of producing a product.

examplea for actual sales can be

Appointment of advertisement expenses,bad debts or it's provison, or some other relative items as the book keeping department think may seen fit.

ekkarill92 answered 1 year ago

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