1) Basis of apportioning service department costs in an organization

Cost apportionment arises because most overheads incurred do not arise solely from the
existence of a cost centre. For example a supervisor can be responsible for more than one cost
centre hence the need to do the apportionment of his payroll or payroll additives.
Due to complexity of cost items, it is not always possible to use a particular basis of apportioning
costs to the various cost centre or department. Hence, sometimes the choice of a suitable basis is
a matter of judgment and common sense. This therefore resulted in difference in opinion by even
accountants on the basis of apportioning costs. However, as long as the overhead cost is shared
fairly by the cost centre then the particular basis of apportionment can be used.
Below are some common sense or commonly recognized basic guideline on the basis of cost
apportionment being tabulated for easy reference:
BASIS OVERHEADS RELATED
Area(space taken up by
each centre)
Rent, rates, heating, light, depreciation of buildings, building
services, fire insurance
Book value or capital
value
Depreciation of machinery, equipments, building, vehicles,
insurance.
Number of employees
Supervision canteen expenses, welfare, wages, cost office
expenses, administration, payment under profit sharing schemes,
employers liability
Technical estimates Power consumption
Volume of pace Heating, lighting, building, depreciation
Number of material
requisition
Materials handling, material storage
Weight of materials Material handling
Direct allocation Power( where meters are used)
Value of machine service or
horse power of machine
Maintenance workers
Value of stock Fire insurance
B) Role of cost accounting in an organization
Introduction
Cost accounting is used to help management understand how much it cost to run a business.
Understanding the role of cost accounting is important when one is trying to put together a team
of managers to help run the company. The CEO of a merchandising organization needs to hire a
CFO to run the accounting system, but the CEO has little understanding of cost accounting. The
CEO will hire a consultant to help her understand the role of cost accounting, the role of ethics in
cost accounting, and compare and contrast the absorption and variable costing. Role of Cost
Accounting

Cost accounting is the area of accounting that record, measures, and report information about
how much things cost within the organization. Cost accounting is used in the following
organization: manufacturing, merchandising, and service companies, governments, universities,
and not-for-profit and profit-making enterprise (Maher, 1994, p.3). The role of cost management
plays in helping an organization to maintain a competitive advantage by creating more value at a
lower cost by efficiently managing an organizations value chain of activities, processes, and
functions (Hilton, 2005).
Role of cost accounting
Control of material cost
Cost of material usually constitute a substantial portion of the total cost of a product. Therefore,
it is necessary to control it as far as possible. Such a control may be exercised by (i) Ensuring un-
interrupted supply of material and spares for production. (ii) By avoiding excessive locking up of
funds/capital in stocks of materials and stores. (iii) Also by the use of techniques like value
analysis, standardization etc. to control material cost.
Control of labour cost
It can be controlled if workers complete their work within the standard time limit. Reduction of
labour turnover and idle time too help us, to control labour cost.

Control of overheads
Overheads consists of indirect expenses which are incurred in the factory, office and sales
department ; they are part of production and sales cost. Such expenses may be controlled by
keeping a strict check over them.
Measuring efficiency
For measuring efficiency, Cost Accounting department should provide information about
standards and actual performance of the concerned activity.
Budgeting
Now-a-days detailed estimates in terms of quantities and amounts At* drawn up before the start
of each activity. This is done to ensured that a practicable course of action can be chalked out
and the actual performance corresponds with the estimated or budgeted performance. The
preparation of the budget is the function of Costing Department.
Price determination
Cost accounts should provide information, which enables the management to fix remunerative
selling prices for various items of products and services in different circumstances.
Curtailment of loss during the off-season
Cost Accounting can also provide information, which may enable reduction of overhead, by
utilizing idle capacity during the off-season or by lengthening the season.
Expansion:
Cost Accounts may provide estimates of production of various levels on the basis of which the
management may be able to formulate its approach to expansion.
Arriving at decisions
Most of the decisions in a business undertaking involve correct statements of the likely effect on
profits. Cost Accounts are of vital help in this respect. In fact, without proper cost accounting,
decision would be like taking a jump in the dark, such as when production of a product is
stopped
Conclusion
In conclusion, choosing a cost accounting system depends on the strategic intent of the firm.
Initially, any concepts relating to the use of cost practices can lead to potentially improved
resource allocation. Techniques such as benefit-cost analysis should always be used regardless
of final decision-making methodology, and consequent costing systems will reflect the degree of
attention given to improvement-based thinking.














References;
Hilton, Ronald W., Maher, Michael W., Selto, Frank H. (2006). Cost Management: Strategies for
Business Decisions, 3e. New York. New York: The McGraw-Hill Companies.

Ice, James W., (2007). Strategic Intent: A Key to Business Strategy Development and Cultural
Change. Volume 25, number 4. Retrieved April 30, 2009 from UOP resource.


Pyzdek, Thomas. (2003) The Six Sigma Handbook. McGraw-Hill Companies. New York