Enterprise overheads

While the costs associated with the purchaseraw materials and materials, the wages of workers who produce a certain product, commissions paid to sellers, are fairly easily attributed to the cost of production and allow you to determine the profitability of sales, such costs as, for example, renting office space, diffuse for various goods is quite problematic. Expenses of this kind are known as overheads, and they are usually deducted from the company's total revenues before the net profit is calculated.

However, this approach is in terms ofmodern management is not entirely correct. After all, it may turn out that the product, which, according to standard calculations, brings the company the greatest profit, in fact, is the most unprofitable. If the decision on the company's product policy is taken without taking into account overhead costs, the results, to the surprise of the managers, can be quite deplorable.

However, before you understand howit may be necessary to determine the composition of overhead costs. In fact, it is largely dependent on the nature of the enterprise, but some traditional overhead costs can still be identified. This is, first of all, everything related to management costs, such as office rent, computer purchases, manager's salaries, etc. In addition, it can include wear of production equipment, the cost of storing goods in a warehouse, insurance, etc. As you have already understood, the general logic is that overhead costs are expenses that can not be attributed directly to a particular product, according to the classic rules of accounting.

But is it really impossible to do this? In fact, according to the latest directions in management, overhead costs are not only possible, but you also need to try to distribute the various products from the company's assortment. It's over, it's impossible to do this unerringly, so this form of accounting will not work for tax reporting, but for internal use it will be very effective. True, this will take a little work.

All you need to do is to tryTo determine in what proportion your overhead costs can be distributed among different goods. The simplest way is for you to divide all expenses according to the working time that the workers directly manufacturing the product spend on its production. This method allows you to more accurately see the real value of the costs that an enterprise incurs to produce one unit of a particular product, but the result is still rather inaccurate.

If you want to see reliable figures, then youyou will have to analyze each of the types of overhead costs for what product they can be attributed to. Suppose this is the cost associated with customer service. You can calculate the percentage as to which product customers are calling in the service, multiply that percentage by the total amount and add the resulting figures to the cost of each product. If it is a matter of equipment wear, then you can implement the separation of overheads according to the volume of production. The salary of marketers can be divided according to the fact that they are working on the promotion of what products directly to the market.

By a similar principle, you can distributeall cost. The result you get will definitely surprise you. Quite often, outsiders with a high cost are, in fact, the most profitable goods. Having built your product policy on the principle of a roll-call distribution of overhead costs, you will be able to achieve truly outstanding results.

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