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What is Re-Apportionment of Service Departments Overheads | Basis of Re-Apportionment

Re-Apportionment of Service Departments Overheads
Re-Apportionment of Service Departments Overheads

Re-Apportionment of Service Departments Overheads (Secondary Distribution) Meaning

Once the overhead have been allocated and apportioned to production and service department and totaled, the next step is to re-apportion the service department costs to production departments.

This is necessary because our ultimate object is to charge overheads to cost units and normally products do not pass through service departments but service departments do benefit the manufacturing of products.

Therefore, it is logical that product cost should pear and equitable share of cost of service departments. This is called secondary distribution of overhead or re-apportionment of service departments overheads.

It should be noted that primary distribution is followed by secondary distribution.

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Basis of Re-Apportionment

The basis of re-apportionment of service department costs is similar to apportionment of overheads discussed earlier. Some of the important basis of apportionment of service departments costs are as follows-

Service Department Costs Basis of Apportionment
Maintenance department Hours worked for each department
Employment/ personnel department

Rate of labour turnover or number of employees in each department

Payroll or time department

Direct labour hours, machine hours, number of employees

Stores keeping department No. of requisitions, quantity or value of materials
Welfare department No. of employees in each department
Internal transport service Truck hours, truck mileage or tonnage
Building service department Relative area of each department
Power house Floor area cubic contents

Methods of Re-Apportionment or Re-distribution

At first expenses of all departments are complied without making a distinction between production and service departments but then, the expenses of the service departments are apportioned among the production departments on a suitable basis. It is also possible that expenses of one service department may also be apportioned in part to another service department to arrive at the total expenses incurred on the latter departments which win then be distributed among production department. Following are the method of re-distribution of service departing costs to production department.

Apportionment to Production Departments Only

Under this method, the cost of service department are directly apportioned to production departments, without apportioning it to other service departments. It is also known as Direct Distribution Method.

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