Reciprocal reapportionment
Reciprocal reapportionment recognises services that service centres provide to each other before distributing their fully loaded costs to production. Simultaneous equations or repeated distribution can be used. Each equation includes a centre’s own cost plus its share of other service-centre costs. Fully loaded service-centre totals exceed their original costs because they include mutual services; final production allocations must still reconcile to the original total without double counting.
Worked example
Service A has own cost $8,000 and receives 20% of B; B has own cost $4,000 and receives 10% of A. A =8,000+0.2B and B =4,000+0.1A. Substitution gives 0.98A =8,800, so A =$8,979.59 and B =$4,897.96. Allocating A’s remaining 90% and B’s remaining 80% to production gives $8,081.63+$3,918.37 =$12,000, reconciling to the original costs.
Common mistake
Do not add the equation totals to production without removing the portions representing services to each other.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |