The allocation base should bear causal relationship between the incurrence of the cost and the basis used for cost assignment.  To the extent possible, it should reflect in a reasonable manner how the cost object consumes the resources being allocated.  For example, in a machine-driven manufacturing environment, labor hours would not be a proper allocation base to assign indirect manufacturing costs.  Machine or process hours would be more appropriate. For more information, see our training module Direct and Indirect Costs.