CORPORATIONS ARE REQUIRED BY GENERALLY accepted accounting principles to allocate (mathematically distribute or apportion) their overhead expenses to individual profit centers when they prepare information for the Internal Revenue Service (absorption accounting in LIFO/FIFO calculations), the Securities and Exchange Commission, and certain industry-specific regulatory authorities. There are numerous criteria that may be used as the [...]

The process of allocating overhead charges to individual businesses can lead to several problems within a company.
It Fosters Politics
The process of allocating overhead charges to individual businesses fosters political infighting. When an executive shines as a result of her contribution to the profitability of the business, this is a positive result. However, when costs are [...]