Fully allocated cost meaning

In legal practice, fully allocated cost (also called fully distributed cost) describes the total cost attributed to a product or service once all direct costs and an appropriate share of indirect and common overheads have been allocated across the undertaking’s activities. It is not generally defined in legislation or case law, but is a descriptive accounting approach used in regulatory, competition, procurement and public‑sector charging matters across the UK and Ireland. Key features include: allocation of common costs that are not directly attributable to a particular service; use of allocation bases or cost drivers; and results that can vary with methodology. Fully allocated cost is distinct from marginal, incremental or avoidable cost measures. Typical usage: regulators frequently require fully allocated cost in regulatory accounts and price controls (for example in communications, energy, transport and water). Competition authorities may use fully allocated cost as a benchmark in predatory pricing or margin squeeze analyses where appropriate. Public bodies often refer to “full cost recovery” when setting fees and charges, which similarly includes overheads. Usage and meaning are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, guided by sector‑specific regulatory accounting rules and public finance guidance (for example HM Treasury’s Managing Public...