how does the direct method of cost allocation work

incremental cost are defined as the change in overall cost that result from particular decision making. it include both fixed cost and veriable cost.

sunk cost are those cost which are made once and for all can't be altered incremental or decreased by varying the rate of output, nor can they be recovered.

for example - once it is decided to make incremental investment expenditure and the fund are allocated and spend

There is no difference

allocation rate=cost pool amount/ cost driver volume