How to Categorize Expenses

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Allocated costs

Operating budgets may include allocated costs—costs associated with operating the overall company that are not tied to individual products or departments. The most significant allocation is usually overhead. This figure typically includes the office rent for the building occupied by corporate headquarters, and salaries and expenses associated with corporate management. How these costs are attributed to individual departments varies from one company to another. Some organizations may allocate overhead to certain department budgets—those that produce revenue, for example—and not others.

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