Allocation And Apportionment

Question 1

Absorption costing

Answer 1

A way of finding an appropriate amount of overhead per cost unit so that the total cost of producing a product or job can be found.

Question 2

Allocation

Answer 2

Whole overhead incurred by one cost centre - charged in full to that cost centre

Question 3

Apportionment

Answer 3

Overheads are shared - amongst the cost centres that jointly incurred the cost

Question 4

Overheads

Answer 4

Indirect labour, indirect materials and indirect expenses

Question 5

Production cost centres

Answer 5

A cost centre that actually produces cost units

Question 6

Reapportionment

Answer 6

Apportionment or service cost centres costs to the production cost centres that uses their service

Question 7

Service cost centres

Answer 7

A cost centre that is not directly involved in production, but with supporting production by providing a service, e.g. Maintenance and stores

Question 8

Absorption costing steps

Answer 8

1 allocate
2 allocate and apportion indirect costs
3 reapportion
4 absorb

Question 9

Direct vs step-down method?

Answer 9

Direct ignores inter-service department work
Step-down recognises some inter-service department work

Reapportion one service centre to all (including other service centre) then reapportion the second service centre to all production cost centres