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Re-apportionment of Service Cost Centre Costs



Re-apportionment of Service Cost Centre Costs


Re-apportionment of service cost centre costs is the process of allocating the costs of service cost centres to production cost centres. Service cost centres are those that exist to provide services to other cost centres, but do not directly produce the final product. Production cost centres are those that directly produce the final product.


There are two main methods of re-apportioning service cost centre costs:

  • Direct method: This method simply allocates the costs of a service cost centre to production cost centres based on the usage of the service. For example, if the service cost centre is a maintenance department, the costs of the maintenance department would be allocated to production cost centres based on the amount of maintenance that each production cost centre requires.

  • Step-down method: This method is more complex and is used when there are reciprocal services between service cost centres. For example, if the service cost centre is a maintenance department and it also provides services to the production cost centre, the costs of the maintenance department would first be allocated to the other service cost centres based on their usage. The costs of the other service cost centres would then be allocated to the production cost centres based on their usage.

The choice of method depends on the specific circumstances of the organisation. The direct method is simpler to use, but it may not be as accurate as the step-down method if there are reciprocal services between service cost centres.


Here is an example of how to re-apportion service cost centre costs using the direct method:


Example:


A company has two production cost centres, A and B, and two service cost centres, C and D.

The following table shows the costs of each cost centre:



​Cost centre

​Cost

A

​$100,000

​B

​$150,000

​C

​$50,000

​D

​$40,000


The following table shows the usage of the service cost centres by the production cost centres:

​Production cost centre

Cost centre C

​Cost centre D

A

20%

​30%

​B

40%

20%


To re-apportion the costs of the service cost centres to the production cost centres using the direct method, simply multiply the cost of each service cost centre by the percentage of usage by each production cost centre. For example, the cost of cost centre C allocated to production cost centre A would be $50,000 * 20% = $10,000.


The following table shows the re-apportioned costs of the service cost centres:

Production cost centre

​Cost centre C

Cost centre D

Total

​A

$10,000

​$12,000

​$122,000

​B

$20,000

​$8,000

​$178,000

​Total

$30,000

​$20,000

​$300,000


Once the service cost centre costs have been re-apportioned to the production cost centres, they can be added to the direct costs of the production cost centres to calculate the total cost of each production cost centre.


How Bestar can Help


Bestar can help with re-apportionment of service cost centre costs in a number of ways:

  • By providing accurate and up-to-date data: Bestar can provide accurate and up-to-date data on the costs of service cost centres and the usage of service cost centres by production cost centres. This data is essential for accurate re-apportionment of service cost centre costs.

  • By providing software to automate the re-apportionment process: Bestar offers a variety of software solutions that can automate the re-apportionment of service cost centre costs. This can save organizations a significant amount of time and effort.

  • By providing consulting services: Bestar also offers consulting services to help organizations with re-apportionment of service cost centre costs. This can be helpful for organizations that are new to re-apportionment or that have complex re-apportionment needs.

Here are some specific examples of how Bestar can help:

  • ERP software can be used to track the costs of service cost centres and the usage of service cost centres by production cost centres. This data can then be used to re-apportion the costs of the service cost centres to the production cost centres using the direct or step-down method.

  • Budgeting and forecasting software can be used to create budgets and forecasts for service cost centres and production cost centres. This can help organizations to track their spending and to identify any areas where they can save money.

  • Bestar's consulting services can be used to help organizations to develop and implement a re-apportionment of service cost centre costs process. Bestar's consultants can also help organizations to troubleshoot any problems that they are having with their re-apportionment process.

Overall, Bestar can provide organizations with a comprehensive solution for re-apportionment of service cost centre costs. Contact us today!


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