What is an Allocation?

An Allocation is the process of distributing or assigning financial resources, costs, or profits across different departments, projects, or investment categories within an organization. It helps businesses manage financial planning and evaluate profitability at granular levels.

How Allocation Works

• Cost Allocation: Distributing shared expenses (like rent or utilities) among departments based on usage.

• Resource Allocation: Assigning budgets or personnel to specific initiatives.

• Investment Allocation: Dividing capital among various asset classes based on risk and return objectives.

Example

A business allocates 60% of its annual marketing budget to digital campaigns, 30% to events, and 10% to print advertising, based on past performance data.

Benefits

• Improves cost control and accountability

• Supports strategic decision-making

• Enables profitability analysis by department or project