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Overhead reapportionment

Overhead reapportionment transfers service-centre costs to the production centres benefiting from their work. A direct method ignores services between service centres; a step-down method recognises selected services in sequence; a reciprocal method recognises mutual services. After the transfer, production-centre totals can be absorbed into output. Use service-usage data and distinguish the method required rather than assuming one universal order or basis.

Worked example

A maintenance centre costing $20,000 supplies 75% of its work to production A and 25% to B, with no mutual service complications. Transfer $15,000 to A and $5,000 to B.

Common mistake

Do not absorb service-centre costs directly into products and then add the same costs again through production-centre rates.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027