Outline the term reapportionment of overheads.

• A. Transferring service department costs to production departments because overheads can only be recovered through production.
• B. Allocating service department costs directly to customers.
• C. Relying on depreciation to cover overhead.
• D. Apportioning overheads to production departments by random method.

Answer: (A)

Reapportionment of overheads is the process of moving the costs incurred in service departments (such as maintenance, canteen, or factory administration) to the production departments that use those services. The aim is to ensure all overheads are included in product costs, since service departments themselves don’t produce goods but support production. After service department costs are identified, they are redistributed to production departments according to how much each uses the services, so the total overheads are recovered through production.

That’s why transferring service department costs to production departments to recover overheads through production is the best description. Charging these costs directly to customers wouldn’t show them as part of product cost, relying on depreciation wouldn’t allocate current overheads, and allocating at random wouldn’t reflect actual usage.