What is meant by re-apportionment of overheads?

What is meant by re-apportionment of overheads?

• A. Service department costs are reallocated between production departments.
• B. Overheads are absorbed by selling departments.
• C. Overheads are charged to owners personally.
• D. Overheads are ignored in cost allocation.

Answer: (A)

Re-apportionment of overheads means reallocating the costs from service departments to the production departments that actually use their services. In many cost systems, overheads are first assigned to service departments (like maintenance, canteen, or IT), and then those costs are spread out to the production departments based on usage measures (such as hours worked, floor area, or headcount). This step ensures each production department bears a fair share of the overheads that it consumes, giving a more accurate view of the cost of producing each product or department. The other options don’t describe this process: absorbing overheads by selling departments, charging to owners personally, or ignoring overheads altogether don’t reflect reallocating service-department costs to where they are used.

Re-apportionment of overheads means reallocating the costs from service departments to the production departments that actually use their services. In many cost systems, overheads are first assigned to service departments (like maintenance, canteen, or IT), and then those costs are spread out to the production departments based on usage measures (such as hours worked, floor area, or headcount). This step ensures each production department bears a fair share of the overheads that it consumes, giving a more accurate view of the cost of producing each product or department. The other options don’t describe this process: absorbing overheads by selling departments, charging to owners personally, or ignoring overheads altogether don’t reflect reallocating service-department costs to where they are used.