A company reapportions the costs incurred by two service cost

A company reapportions the costs incurred by two service cost centres, materials handling and inspection, to the three production cost centres of machining, finishing and assembly.
The following are the overhead costs which have been allocated and apportioned to the five cost centres:

…………………………(£000)
Machining …………….400
Finishing ………………200
Assembly ……………..100
Materials handling …100
Inspection ………………50

Estimates of the benefits received by each cost centre are as follows:

You are required to:
(a) Calculate the charge for overhead to each of the three production cost centres, including the amounts reapportioned from the two service centres, using:
(i) The continuous allotment (or repeated distribution) method
(ii) An algebraic method
(b) Comment on whether reapportioning service cost centre costs is generally worthwhile and suggest an alternative treatment for such costs.
(c) Discuss the following statement: ‘Some writers advocate that an under- or over-absorption of overhead should be apportioned between the cost of goods sold in the period to which it relates and to closing stocks. However, the United Kingdom practice is to treat under- or over-absorption of overhead as a period cost’.

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