Page 172 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes The following is a list of more conventional basis of apportionment commonly used in
manufacturing organisations or industries:

S.No. Overhead Cost Basis of Apportionment
(i) personnel Department Number of employees in each department or Labour
hours worked.
(ii) Time-keeping Department Number of workers in each department Machine hours
or Total labour.
(iii) Maintenance Department Hours used, No. of cards punched, etc.
(iv) Store-keeping Department Quantity or Cost of materials used or No. of requisitions.
(v) purchase Department Cost of material purchased or No. of purchase orders
placed.
(vi) Building Service Department Space occupied by each department.
(vii) Factory Rent, Rates and Taxes, Heating Floor space occupied or Floor area.
and Lighting, Repairs, Depreciation and
Insurance of Factory Buildings.
(viii) Air Conditioning Floor space occupied.
(ix) Depreciation and Insurance of plant, Capital value of machinery.
Machinery and Equipments.
(x) Electric power Horse power, kwh, HP multiplied by hours, machine
capacities.
(xi) Electric Light Number of light points, floor space occupied, hours
used, or watts if separate meters are available.
(xii) Steam Based on a consumption return or potential
consumption.
(xiii) Canteen Expenses, Labour Welfare Number of workers or wages for each department.
Expenses, Time-keeping and Other Benefits.
(xiv) Machine Shop Machine hours, Labour hours.
(xv) Delivery Expenses Weight, volume, ton-mile, etc.
(xvi) Internal Transport Weight or Value of products handled.
(xvii) Audit Fees Sales or Total cost.
(xviii) Tabulation Expenses Hours used, Number of cards punched, etc.
Reapportionment of Overheads

The process of assigning service department overheads to production departments is called
reassignment or re-apportionment. Service departments are those departments which do not
directly take part in the production of goods. Such department provides ancillary services.
Examples of such departments are boiler house, canteen, stores, time office, dispensary, etc.
Methods used for the reapportionment of service department expenses over the production
department:
A. Direct re-distribution method: Under this method service department costs are apportioned
over the production departments only, ignoring the services rendered by one service
department to the other.
B. Step Method or Non-reciprocal method: This method gives cognizance to the service
rendered by service department to another service department. The sequence here
begins with the department that renders service to the maximum number of other service
departments.
C. Reciprocal Service Method: These methods are used when different service departments
render services to each other, in addition to rendering services to production departments.

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