Allocated describes an amount that has been through an allocation, meaning it has been divided up and assigned to time periods, departments, products, customers or other cost objects. The noun entry explains the process in full.
Allocated costs in practice
An allocated cost is a share of a common cost rather than a cost caused directly by the item that carries it. In a manufacturer's books, each unit's cost includes some allocated manufacturing overhead, such as a slice of factory rent, utilities and equipment depreciation. In a company with several divisions, each division's report may show allocated head-office costs for payroll, IT or legal services.
Allocation also works across time. Depreciation allocates the cost of a long-lived asset to the years that benefit from it, and amortization does the same for intangibles. A prepaid insurance premium is allocated to the months it covers.
Because the share each item receives depends on the basis used, allocated costs need care in decisions. A product line may look unprofitable only because it carries a large slice of fixed overhead that would remain even if the line were dropped. Managers therefore separate allocated costs from avoidable ones when judging whether to keep a product, a branch or a customer, focusing on the relevant cost of each choice.