Page 174 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes (a) Secondary distribution Summary

Production departments
Total A B C
Total as per primary summary 6,000 3,000 2,000 1,000
Service Dept. 1 (90% of 300) 270 60 120 90
Service Dept. 2 (80% of 330) 264 132 66 66
Total 6534 3192 2186 1156

(b) Repeated distribution Method
Production departments Service departments
Items A B C X Y
Total as per primary summary 3,000 2,000 1,000 234 300
Service dept.1 47 94 70 -234 23
Service dept.2 129 65 65 64 -323
Service dept.1 13 26 19 -64 6
Service dept.2 2 2 2 - -
Total 3,191 2,187 1,156 - -

(c) Trial and Error Method

In this method the cost of first service department is apportioned to other service departments
only in the given percentage. The cost of the second service departments then is apportioned
to the first and other service departments. In this way, when the cost of all service departments
has been apportioned, the process is repeated till the service departments costs are reduced to
negligible amounts. In this way, the total cost of each service department is found out by trial
and error.

Apportionment on Non-reciprocal basis (Step Ladder Method)

This method is used when a service department renders services to other service departments
but does not receive services of the other service departments, i.e. when service departments are
not inter-dependent.
In this method, the service departments are arranged in descending order of their serviceability.
The service department which serves the next largest number of departments is taken up next
and its cost is apportioned to other service and production departments excepting the first service
department.
This process is continued till the cost of the last service department is apportioned.

Example: The Kartik Company is divided into four departments. A, B and C are producing
departments, and D is a service department. The actual costs for a period are as follows:

Expenses `
Rent 10,000
Repairs 6,000
Depreciation of plant 4,500
Light expenses 1,000

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