Page 104 - Microsoft Word - 00 ACCA F2 Prelims.docx

Chaptter 7

Reaapporttionmeent

Servicee cost centtres (deparrtments) arre not direcctly involveed in makinng productts and
therefoore the prodduction oveerheads off service coost centress must be sshared outt
betweeen the prodduction cosst centres ((departments) using a suitable basis.

Fixxed prodduction ooverheadd

Prodduction PProductionn Servicce
cost ccentre1 cost centre 2 cost cenntre

This reapportionmment will bee done on a fair basis, for exammple if the service coost
centre is maintennance, the cost could be split beetween thee productioon departmments
dependding on thee proportion of time mmaintenancce works foor each deepartment.

Continuuing the illuustration –– assume thhe service cost centrre works 600% of the ttime for
producction cost ccentre 1 and 40% of tthe time for productioon cost cenntre 2.

Prod ccost Prrod cost Servicee Tootal
centrre 1 ceentre 2 cost cenntre overrhead

$ $ $ $
Total overhead 78,7700 82,930 50,1700 2111,800

Reappoortion servvice cost 30,102 20,068 (50,1700) 0
centre
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Total overhead 108,8802 1 102,998 00 2111,800

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Notice that the ttotal overhhead neveer changess.

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