1. Allocation it is a term used where the overhead cost item is be charged to a specific cost centre without the need for any estimation procedure e.g. the salary of a sales manager will be allocated to the selling overhead cost centre.
2. Apportionment occurs when the total value of an overhead item is shared between two or more cost centres. An appointment bases which reflects the benefits and extracted by a cost centre must be used e.g., rent payable may be apportioned on the bases of area of occupancy.
3. Reapportionment occurs when service department cost are charged to user department. e.g., the maintenance department overheads are totaled and then charged to user department which may include other services or non productive department.
4. A reciprocal service charge is a situation where service department provides services to each other as they continue to serve productive departments e.g., where maintenance department uses power and the power department requires maintenance work on its machinery.
5. Absorption is a term used for the method by which overhead costs are charged to cost units.
Wilfykil answered the question on August 5, 2019 at 14:40
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