Cost Accounting
Service Cost Centres
Because no production cost units pass through the service cost centers, it is necessary to apportion the service department costs, to the production cost centers so that all production costs (including those for the servicing departments) are absorbed into production. Typical basis for secondary apportionment, i.e. the apportionment of service costs to production departments are given below:
| Service Department | Possible basis of Apportionment to |
| Production Cost Centres | |
| Maintenance | Maintenance Labour Hours |
| Maintenance Wages | |
| Plant value | |
| Stores | Number of Requisitions |
| Weight of Materials issued | |
| Inspection | Number of production employees per cost centre |
| Number of Inspection Tickets | |
| Number of Jobs | |
| Production Control | No of Production Employees per cost centre |
| No of jobs | |
| Power General Generation | Metered Usage |
| Notional Capacity | |
| Technical Estimate | |
| Personnel Department | No of Employees per Department |
Notes
The basis chosen should be one that is judged to be the most equitable way of sharing the service department ‘s costs over the departments which use the service. This may mean that a particular and unique basis of apportionment may have to be derived. It must reflect the use made of the services provided.
Wherever possible, service department costs should be charged directly, i.e. allocated. An example
of this would be maintenance wages and materials. When a maintenance job is done for a department, the wages and materials used would be charged directly to the department concerned. In this way only unallocated service department costs need to be apportioned.
