# Secondary Distribution of Overheads
## What it is
After primary distribution, overheads stand totalled for every department — both production and service departments. But service departments (e.g., maintenance, stores, canteen) do not produce sellable output, so their cost must be pushed back onto the production departments. This pushing-back is called secondary distribution (or re-distribution) of overheads.
> Goal: end with overhead sitting only in production departments, ready to be absorbed into products.
## Format (what the table looks like)
| Item | Machining | Assembling | Finishing | X | Y | Z |
|---|---|---|---|---|---|---|
| X | ✓ | ✓ | ✓ | (✓) | ||
| Y | ✓ | ✓ | ✓ | (✓) | ||
| Z | ✓ | ✓ | ✓ | (✓) | ||
| Overheads after secondary distribution | ✓ | ✓ | ✓ | – | – | – |
Notice the service-department columns (X, Y, Z) end at nil, and all the cost lands in the production columns.
## The three methods (decision tree)
```
Secondary Distribution
│
├── A. Direct Re-distribution → NO traffic between service depts
├── B. Step Ladder / Non-reciprocal → ONE-WAY traffic
└── C. Reciprocal Service → TWO-WAY traffic
├── (a) Simultaneous Equation Method
├── (b) Repeated Distribution Method
└── (c) Trial & Error Method
```
### A. Direct Re-distribution Method — “No traffic”
- Assumption: service departments serve only production departments; inter-service-department service is ignored even when it actually exists.
- Simplest, but least accurate.
### B. Step Ladder / Non-reciprocal Method — “One-way traffic”
- A service department can give service to all other departments (including other service departments) but cannot receive service from a department it has already served.
- You close service departments one at a time, usually starting with the one serving the most other departments.
### C. Reciprocal Service Method — “Two-way traffic”
- A service department can both give and receive service from other service departments. Most realistic.
- Done by one of three techniques:
| Technique | Core idea |
|---|---|
| (a) Simultaneous Equation | First find the total cost of each service department algebraically, then re-distribute to production departments on given percentages. |
| (b) Repeated Distribution | Keep distributing each service department's cost on agreed percentages, round after round, until service-department balances are exhausted (or negligibly small). |
| (c) Trial & Error | Apportion among service departments only, back and forth, until the amount to apportion becomes negligible; total each service department, then send the totals to production departments. |
## Picking the right method
- Inter-service service exists and matters → Reciprocal.
- One-directional service relationship → Step Ladder.
- Inter-service service is immaterial / to be ignored → Direct.