Definition of Arbitrary Allocation
This is a cost allocation method that does not provide any hint about the actual cost incurred due to no base for cost calculation. For illustration, the cost of a lecturer is not significantly dependent upon the number of students available in a class.
Example of Arbitrary Allocation:
A class of 30 students requires one teacher (say) who teaches for one hour as does a class of 150 students. In this manner, utilizing the number of students as a cost allocation base would result in an arbitrary allotment.