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Cost and Management Accounting · Overheads - Absorption Costing Method

Apportionment and Primary Distribution of Overheads

Updated 4 October 2026 · Fact-checked

Primary distribution spreads each factory overhead across all production and service departments. Costs that belong to one department are allocated directly. Shared costs are apportioned using a suitable base, such as floor area for rent. You show it all in one summary, with each column totalling the original overhead.

Understand Apportionment and Primary Distribution of Overheads

A factory has many costs that no single department owns. Rent covers the whole building. One electricity meter serves every department. You cannot charge these to a product directly, so you first push them to departments.

There are two steps. Allocation means charging an entire item of cost to one department because it clearly belongs there, for example the salary of the supervisor of the Assembly department. Apportionment means dividing an item of cost among several departments in a fair proportion, because they all share the benefit.

The proportion comes from a basis of apportionment. A good basis reflects the cause or benefit: rent follows floor area, lighting follows number of light points, and power follows kilowatt-hours or horsepower × machine hours. Pick the base that matches why the cost arises.

Primary distribution is this first round. It covers both production departments (such as Machining and Assembly) and service departments (such as Stores, Maintenance and Canteen). You list overheads down the rows, departments across the columns, and show the base and the amounts. The last row gives each department's total primary overhead. That total is then carried to secondary distribution, where service department costs are reapportioned to production departments.

Key rules to remember

Apportionment to a department
Share of department = (Total overhead ÷ Total units of base) × Department's units of base
Same as Total overhead × Department's base ÷ Total base. Use the total of the base across all departments, including service departments.
Ratio method
Share = Total overhead × (Department's ratio ÷ Sum of ratios)
Use when the base is given as a ratio, such as 4 : 3 : 2 : 1.
Check total
Sum of all department amounts = Total overhead for that item
Check every row and the grand total of the summary.
Common bases
Rent, rates, depreciation of building, repairs of building = floor area or volume; Lighting = light points or area; Power = kWh or HP × machine hours; Insurance of machinery, depreciation of machinery = value of machinery; Insurance of stock = value of stock; Canteen, ESI, PF contribution = number of employees or wages; Supervision = number of workers; Personnel/HR = number of employees
If the question gives a base, always use it, even if you would choose another.

How to solve Apportionment and Primary Distribution of Overheads questions

Use this layout for any primary distribution question.

  1. 1Read the question and list all departments, production and service, as columns.
  2. 2List each overhead as a row, with its total amount and the base given or chosen.
  3. 3Identify items that can be directly allocated, such as a department's own indirect wages or stated expenses. Enter these in that column only.
  4. 4For each shared item, add up the base units across all departments and work out the rate per unit of base.
  5. 5Multiply the rate by each department's units and enter the amount. Round only at the end if needed.
  6. 6Check that each row adds back to its total.
  7. 7Add each column to get the total primary overhead per department, and check that the grand total equals all overheads.
  8. 8Carry the totals forward to secondary distribution if the question asks for it.

Quickest way: Ratio-first row method with a total check

When to use it: Use it in numericals with many overheads and 3-5 departments, where time is short.

  1. Convert every base into simple ratios first, such as areas 2,000 : 1,500 : 500 becomes 4 : 3 : 1.
  2. Write the ratio once and reuse it for all items that share that base, such as rent, depreciation of building and lighting if on area.
  3. Combine items with the same base into one line before apportioning, then split once.
  4. Do the total check on each row. A mismatch usually shows a wrong ratio sum.
  5. For MCQs, find the base, compute the one department's share only, and match it to the options. Eliminate options that exceed the total or that use the wrong base.
  6. In written answers, show the base column and one line of working per item. Step marks come from the correct base and the correct totals.

Common mistakes in Apportionment and Primary Distribution of Overheads

  • Using the wrong base for an item, such as floor area for power.

    Students apply the first base they see instead of matching the base to the cause of the cost.

    Fix: Ask what drives the cost. Use the base the question gives. If none is given, pick the one linked to usage or benefit and state it.

  • Leaving out service departments when finding the total base.

    Students think only production departments take overhead.

    Fix: In primary distribution, every department, production and service, receives its share. Include all in the base total.

  • Apportioning an item that should be allocated directly.

    Students apportion every figure by habit.

    Fix: If a cost clearly belongs to one department, put it fully there. Only shared costs need a base.

  • The department totals do not match the total overhead.

    No row check, or arithmetic slips in ratios.

    Fix: Add across each row and tick it to the total. Re-check the grand total of the summary.

  • Mixing primary and secondary distribution by reapportioning service costs too early.

    Students rush to the final overhead per production department.

    Fix: Complete primary distribution first. Show the total per department, then do secondary distribution as a separate step.

Worked examples

Example 1

A factory has two production departments, P1 and P2, and two service departments, S1 and S2. Overheads: rent ₹1,20,000; lighting ₹18,000; depreciation of machinery ₹60,000. Floor area (sq. ft.): P1 4,000; P2 3,000; S1 2,000; S2 1,000. Light points: P1 20; P2 15; S1 10; S2 5. Machinery value: P1 ₹4,00,000; P2 ₹3,00,000; S1 ₹2,00,000; S2 ₹1,00,000. Prepare the primary distribution summary on suitable bases (rent on area, lighting on light points, depreciation on machinery value).

Show the solution
  1. Rent: total area 10,000 sq. ft. Ratio 4 : 3 : 2 : 1. P1 = 1,20,000 × 4 ÷ 10 = ₹48,000; P2 = ₹36,000; S1 = ₹24,000; S2 = ₹12,000. Total ₹1,20,000.
  2. Lighting: total points 50, so ₹360 per point. P1 = 20 × 360 = ₹7,200; P2 = 15 × 360 = ₹5,400; S1 = 10 × 360 = ₹3,600; S2 = 5 × 360 = ₹1,800. Total ₹18,000.
  3. Depreciation: total value ₹10,00,000. Ratio 4 : 3 : 2 : 1. P1 = ₹24,000; P2 = ₹18,000; S1 = ₹12,000; S2 = ₹6,000. Total ₹60,000.
  4. Column totals: P1 = 48,000 + 7,200 + 24,000 = ₹79,200; P2 = 36,000 + 5,400 + 18,000 = ₹59,400; S1 = 24,000 + 3,600 + 12,000 = ₹39,600; S2 = 12,000 + 1,800 + 6,000 = ₹19,800.
  5. Check: 79,200 + 59,400 + 39,600 + 19,800 = ₹1,98,000, which equals 1,20,000 + 18,000 + 60,000.

Answer: Primary overheads: P1 ₹79,200; P2 ₹59,400; S1 ₹39,600; S2 ₹19,800. Total ₹1,98,000.

Example 2

A company has three departments: Machining (M), Assembly (A) and Stores (S, a service department). Indirect wages of ₹30,000 belong to Machining and ₹10,000 to Stores (allocated directly). Power ₹90,000 is shared on kWh: M 6,000; A 2,000; S 1,000. Canteen expenses ₹54,000 are shared on number of employees: M 20; A 25; S 5. Find the total primary overhead of each department.

Show the solution
  1. Allocation: indirect wages go directly. M = ₹30,000; S = ₹10,000; A = nil.
  2. Power: total kWh 9,000, so ₹10 per kWh. M = ₹60,000; A = ₹20,000; S = ₹10,000. Total ₹90,000.
  3. Canteen: total employees 50, so ₹1,080 per employee. M = 20 × 1,080 = ₹21,600; A = 25 × 1,080 = ₹27,000; S = 5 × 1,080 = ₹5,400. Total ₹54,000.
  4. Totals: M = 30,000 + 60,000 + 21,600 = ₹1,11,600; A = 0 + 20,000 + 27,000 = ₹47,000; S = 10,000 + 10,000 + 5,400 = ₹25,400.
  5. Check: 1,11,600 + 47,000 + 25,400 = ₹1,84,000, which equals 40,000 + 90,000 + 54,000.

Answer: Machining ₹1,11,600; Assembly ₹47,000; Stores ₹25,400. Total ₹1,84,000.

Exam tips

  • Draw the summary table first, with the base shown next to each item. Examiners award marks for the right base and the layout.
  • Always include service departments in the base totals. Primary distribution is not complete without them.
  • Do the row and grand total checks. They catch most errors in under a minute.
  • Where the question gives allocated items and shared items together, separate them clearly so you do not apportion a direct cost.
  • If a base is not given, state the base you assume in one line. It protects your marks.

Practice questions from Overheads - Absorption Costing Method

Apportionment and Primary Distribution of Overheads in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Apportionment and Primary Distribution of Overheads: frequently asked questions

What is the difference between allocation and apportionment?

Allocation charges a whole cost item to one department or cost centre because it clearly belongs there. Apportionment divides a shared item among several departments on a fair basis. Allocation needs no base; apportionment does.

What is primary distribution of overheads?

It is the first distribution of factory overheads to all production and service departments, using allocation and apportionment. It ends with a total overhead for each department. Secondary distribution then moves service department costs to production departments.

Which base should I use if the question does not give one?

Choose the base linked to the cause of the cost. For example, area for rent, number of employees for canteen, and kWh for power. Write the base in your answer so the examiner sees your reasoning.

Do service departments get a share in primary distribution?

Yes. Every department that shares the benefit of the cost gets a share, including service departments. Their totals are cleared later in secondary distribution.