Reapportioning a service cost centre
Service centres work for other centres; their costs are passed on by the service provided (km, hours).
Worked example
The service cost centre "vehicle fleet" has primary overheads of £34,435.00. It is reapportioned to the main cost centres by kilometres driven.
| Main cost centre | Primary overheads | Fleet km |
|---|---|---|
| Materials | £5,000.00 | 14,500 |
| Production | £37,500.00 | 19,000 |
| Selling | £10,700.00 | 15,000 |
Worked solution
- 1.Rate = £34,435.00 / 48,500 km = £0.71 per km
- 2.Production share = 19,000 × £0.71 = £13,490.00
- 3.Production total = £37,500.00 + £13,490.00 = £50,990.00
Typical mistake: Reapportioning by the main centres' own overheads instead of by the service used (km).
Your turn
Three problems of exactly this type, each time with new numbers. Amounts with or without thousands separators.
Task
The service cost centre "vehicle fleet" has primary overheads of £22,080.00. It is reapportioned to the main cost centres by kilometres driven.
| Main cost centre | Primary overheads | Fleet km |
|---|---|---|
| Materials | £2,400.00 | 15,500 |
| Production | £20,300.00 | 11,500 |
| Selling | £15,500.00 | 7,500 |
Share reapportioned to production in £
Production overheads after reapportionment in £
Amounts like 12,500 or 12500.50; percentages as a number (12.5). Round to the penny or 2 decimal places.
Formulas for this topic
- Allocate overheads by a fair basis (area, staff, kWh …)
- Reapportion service centres by the service they provide
- Material rate = material overhead / direct materials × 100
- Administration and selling rates = overhead / production cost × 100
Typical mistake: Reapportioning by the main centres' own overheads instead of by the service used (km).
Frequently asked questions
What is the typical mistake in "Reapportioning a service cost centre"?
Reapportioning by the main centres' own overheads instead of by the service used (km).
What is a service cost centre?
A centre such as the vehicle fleet or canteen that works for other centres; its costs are passed on to them.