Choose a fair method to allocate shared overhead costs
Compares allocation bases for shared costs across departments, products, or locations and shows the results and trade-offs of each.
The prompt
Help me allocate shared overhead costs.
What's being allocated: [e.g. rent, IT, HR, executive salaries, utilities - with amounts]
Receiving units: [departments / product lines / locations / clients / grants]
Data I have for each unit: [headcount, square footage, revenue, labor hours, machine hours, transactions, usage]
Purpose of the allocation: [pricing / profitability analysis / management reporting / grant or contract cost recovery / transfer pricing]
Rules I must follow: [e.g. "federal grant cost principles", "contract terms", "none"]
Steps:
1. For each cost pool, suggest 2-3 possible allocation bases and say which best reflects what drives the cost.
2. Calculate the allocation under the recommended basis, and under one alternative for comparison.
3. Show how each unit's profitability changes under each method.
4. Flag pitfalls: allocating by revenue hides real cost drivers; fixed costs allocated to a unit don't go away if the unit is cut; allocations that shift with another unit's volume cause confusion.
Return:
1. A table per cost pool: Basis | Unit | Driver quantity | Share % | Allocated $.
2. A side-by-side profitability view under each method.
3. A recommended method with one-paragraph rationale I can share with managers.
4. A simple monthly process to repeat it.
If this is for grants, government contracts, tax, or transfer pricing, mark the method [CONFIRM WITH SPECIALIST] - those have specific rules.
Highlighted [brackets] are blanks to replace with your own details.
Fill in the blanks and use this promptMore Finance & Accounting prompts
What to fill in
- departments / product lines / locations / clients / grants
- CONFIRM WITH SPECIALIST
How this prompt is built
This prompt follows the Few-Shot structure (Few-shot prompting). A few-shot prompt includes one or more worked examples of the input and the output you want, so the model can copy the pattern instead of guessing it.
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