Which description best matches the concept of repeated distribution in overhead allocation?

Which description best matches the concept of repeated distribution in overhead allocation?

• A. A method of splitting overheads equally among all cost centres
• B. A method that involves starting with the service cost centre with the largest allocated overheads, apportioning those between all other cost centres then repeating the process until the numbers are very small
• C. A method of charging overheads to production units based on the number of units produced
• D. A method that totals service centre overheads and transfers them to sales cost centres

Answer: (D)

Repeated distribution reallocates the overhead costs of service departments to the cost centres that use those services, doing it in iterations until the service-centre amounts are fully absorbed by the user departments. The description that fits this best is: total the service centre overheads and transfer them to the cost centres that rely on them (in the example, sales cost centres). This captures the essential idea of moving service costs to the departments that consume the services, with repeated cycling as needed to account for mutual support among service centres and to eliminate residuals. The other options describe different approaches—equal sharing, an iterative method based on starting with the largest centre, or charging overheads purely on production units—which don’t reflect the idea of reallocating service-centre costs to the consuming cost centres in the way repeated distribution intends.

Repeated distribution reallocates the overhead costs of service departments to the cost centres that use those services, doing it in iterations until the service-centre amounts are fully absorbed by the user departments. The description that fits this best is: total the service centre overheads and transfer them to the cost centres that rely on them (in the example, sales cost centres). This captures the essential idea of moving service costs to the departments that consume the services, with repeated cycling as needed to account for mutual support among service centres and to eliminate residuals. The other options describe different approaches—equal sharing, an iterative method based on starting with the largest centre, or charging overheads purely on production units—which don’t reflect the idea of reallocating service-centre costs to the consuming cost centres in the way repeated distribution intends.