Recall our four steps to allocating overhead. Notice that the first two steps, determining the pools of overhead costs and the allocation base, involved choices that management makes. And the last two steps are purely mathematical calculations that result from the choices made in the first two steps. So there are two choices we must make in designing a cost system, pool and base. It's important to make good choices about cost pools and about allocation bases, because the estimated product or service cost that result from those choices in the cost system we will design, will be used in making management decisions. And we want to make sure we're making good, not poor, management decisions. So we need good cost estimates to do that. Now let's talk about those choices. Traditionally, manufacturing organizations that must allocate manufacturing overhead to products in compliance with financial accounting requirements, have used relatively simple allocation systems. Two common traditional choices are allocating overhead with a plantwide allocation rate, and then allocating overhead with a departmental allocation base. With a planetwide approach, you have just one cost pool that contains all the manufacturing overhead cost. And it's allocated using a relatively simple, volume-driven allocation base like direct labor or machine hours. Our T-shirt maker was an example of this type of allocation system. All 26,000 in manufacturing overhead cost were placed into that one cost pool and allocated to the T-shirts based on direct labor costs. With a departmental approach, you have a cost pool for each department that contains all the overhead costs in that department. And overhead in each department is allocated separately, but again, using a relatively simply allocation base. For companies that have more than one department in which overhead is consumed in different ways, this approach often leads to product costs that more accurately reflect the manufacturing process to make those products.