Apportionment of Overheads—the Problem of Reciprocal Service Departments

Harper, W.M.
December 1966
Accountancy;Dec1966, Vol. 77 Issue 880, p879
Trade Publication
This article looks at the challenge facing reciprocal service departments in Great Britain in 1966 over apportionment of overheads. Apportioning overheads to departments is basically simple in principle. However, things become complicated when two or more service departments do work for each other. There are three methods that can be used to break this deadlock, namely the continuous allotment method, the algebraic method, and the specified order of closing method. In a normal analysis there will not only be reciprocal service departments but also productive and non-reciprocal service departments. To avoid the complications that these imply, simply lift out the reciprocal service departments, apply the selected method of solution, and then re-insert back into the analysis together with original intermediate costs.


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