Direct reapportionment method
The direct reapportionment method distributes each service centre’s cost to production centres while ignoring services provided between service centres. Where usage percentages include another service centre, renormalise the relevant production percentages so the whole cost is assigned. It is simpler than reciprocal methods but may distort production costs where mutual services are substantial. Its suitability depends on materiality and the report’s purpose.
Worked example
A service centre costs $10,000 and supplies A 40%, B 40% and another service centre 20%. Under the direct method A and B each receive $5,000.
Common mistake
Do not allocate only $8,000 and leave $2,000 stranded when the direct method requires the whole service-centre cost to be assigned.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |