Enterprise overheads

While the costs associated with the purchase of raw materials and materials, the wages of workers producing 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 expenses as, for example, renting an office space, Different 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 not entirely correct from the point of view of modern management. 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 deciding how this can be, it is necessary to determine the composition of overheads. 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 purchase, 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 it is also necessary to try to distribute the various goods from the assortment of the company. Of course, 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. However, for this you have to work a little.

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

If you want to see reliable figures, then you will have to analyze each of the types of overheads 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 directly products to the market.

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