How to distribute expenses – based on consumption or units?

It’s a question that happens on daily basis and multiple times per day in world in my opinion. There are so many expenses, which don’t even have to be fixed charges for that matter, but basing purely on consumption and yet they are distributed based on units. Or vice a versa. 

Answer is mostly based on what’s fair. Normally one would expect that if the expense sums up based on consumption, we should also distribute the expense based on consumption. The same goes for fixed charges that are piled based on how many units we have. However it only works if the consumption per unit is measurable. For an example if we’re buying heating per house and not per apartment, we need to distribute the amount somehow to apartments. In this example there are no measuring done on apartment level and hence the only fair way to distribute this expense is based on square meters. What’s using the heating? The space. And the bigger the space the more heating it needs, hence the only logical method for sharing the expense is per square meters really.

The same logic can be applied wherever it seems to make sense. However, do note that sometimes it does not. For an example, again using the apartment logic, if the garbage is charged again per house and not apartment and we cannot measure how many garbage bags someone is putting into the bin, the expense needs to be shared somehow. Here one could argue that the square meters logic is sensible but others could oppose that it’s the people and not the square meters that generate trash. Solution would be to count people and charge the expense per people but the downside would be that then everyone would say that they live alone. If anything it’s just finding the right balance so that the expenses are distributed fairly.

When it comes to distributing expenses between your company units or your own personal expense and company’s expense (i.e. if you’re working from home), the same method with square meters or whatever measureable unit could be used.