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Microlesson · 5-min read

Step-Down (Non-Reciprocal) Method of Re-apportionment

# Step-Down Method

Used when service departments serve other service departments in a one-way chain — no mutual/reciprocal service.

## Procedure

1. Identify the biggest service department and apportion its total cost to all production AND service departments in the given ratio.

2. Then take the second-biggest service department and apportion its (now updated) total cost to all production departments and remaining service departments, EXCEPT the biggest one already closed.

3. Continue step-wise until all service departments are closed.

## How to Spot the "Biggest" Service Department

> In the question, check which department only shows its own cost going out and does NOT receive any apportionment from other service departments — that's the biggest one to apportion first.

## Important Features

  • Each service department is closed only once — no come-back.
  • It's one-directional flow: no service dept gets cost back after being closed.
  • Captures some inter-service relationships but not full reciprocity.

Worked example

### Example 1

Example — Step-Down Method:

After primary distribution: Prod-A 60,000; Prod-B 50,000; Serv-X 20,000; Serv-Y 10,000.

Apportionment ratios (from question):

  • Serv-X (biggest) → Prod-A : Prod-B : Serv-Y = 4 : 3 : 3
  • Serv-Y → Prod-A : Prod-B = 1 : 1

Step 1 — Close Serv-X (₹20,000):

  • Prod-A: 20,000 × 4/10 = 8,000
  • Prod-B: 20,000 × 3/10 = 6,000
  • Serv-Y: 20,000 × 3/10 = 6,000

Now Serv-Y total = 10,000 + 6,000 = 16,000.

Step 2 — Close Serv-Y (₹16,000):

  • Prod-A: 8,000
  • Prod-B: 8,000

Final Totals:

DeptAmount
Prod-A60,000 + 8,000 + 8,000 = 76,000
Prod-B50,000 + 6,000 + 8,000 = 64,000
Serv-X0
Serv-Y0

⚠️ Common exam mistakes

  • Re-distributing cost back to a service department already closed — once closed, never re-opened.
  • Choosing the wrong order — failing to start with the department that doesn't receive any service.
  • Applying step-down when the question clearly mentions mutual service (then use Reciprocal method).
Reference:
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