What are methods of apportionment

What are methods of apportionment

There are basically four methods of apportionment of service department costs.

1.Direct 

If service department do not work for each other then overheads are only charged to production department using appropriate bases. This method of apportionment is called Direct apportionment.

However if it is assumed that service department is providing service to production department and other service department as well then there are three method to deal the situation.

1. Repeated Distribution

under this method cost are distributed among the service department repeadly unless the value of service department becomes negligible.

2. Algebraic method

Algebraic method is used for apportionment.

3.Step-wise Elimination

Under this method firstly one service department is allocated to all departments including serviced department then other service department cost are allocated only to production department.