Hi,

I have been asked to allocate costs as per activity based costing.

My question is - if two cost objects are using the same cost allocation base (homogenous), when you are working out the cost rate per unit for each cost object using the same allocation base do you divide the total cost of that cost object by the total in the allocation base or the total number of that particlular cost object within the allocation base.

For e.g

Two types of customers are cost objects - Retail and Wholesale - They both use the same allocation base

Retail makes up 1500 and wholesale 500 bringing the total to 2000.

Total costs are Retail 75,000 and Wholesale 25,000

If i were to work out the cost rate per unit would I

Divide 75,000/2000 or 75,000/1500

and Divide 25,000/500 or 25,000 by 2000

Hope this makes sense