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.
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.
- What is Installation of a Costing System | Conditions and Factors
- What are the practical difficulties in installing cost accounting
- What is technique of Costing | Various techniques of Costing
- What is Material or Inventory Control | Techniques of Materials Control
- What is FIFO Method | advantages and disadvantages
- What is LIFO method | Advantages and Disadvantages
- What is Periodical or Annual Inventory Control System | Limitations
- Methods of Pricing Material Issues | Cost Methods
- What is Cost of Labour Turnover | Causes, Effects Classification
- What is meant by idle time | Definition, Causes, Control
- What is meaning of overtime work | Reason, Disadvantages
- HIFO method of inventory valuation |Advantages, Disadvantages
- What is two Bin System | Meaning of Bin Card and Specimen
- What is Meaning of NIFO Method | Advantages, Disadvantages
- What is Market Price Method or Replacement Price Method | Advantages, Disadvantages
- What is average cost method of Inventory valuation | Advantages and Disadvantages
- What is Meaning of Weighted Average Price Method | Advantages and Disadvantages
- Meaning of Material Losses | Types and Treatment
- What is Difference Between Waste and Scrap
- What is Meaning of Obsolete Material |Causes, Treatment and Losses
- What are Methods of Labour Remuneration | Advantages, Disadvantages
- What is Meaning of Piece Wage Rate Method | Advantages Disadvantages
- What is Meaning of Remuneration
- What is Collective Bonus Plan | Suitability, Advantages, Disadvantages
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