Business – Banking – Management – Marketing & Sales

Posts Tagged ‘indirect cost’

Indirect cost traceability

Category: Budgeting Methodology

The indirect cost which a company has to spend to keep it’s operations going are no predetermined fatality and no legacy from the past. The expense of each indirect cost item should be justified through the indirect function it has been spent for.



The problem of indirect cost distribution – relating indirect functions to the productive tasks performed

Category: Budgeting Methodology

Indirect costs, independent from the purpose they serve, are incurred as types of cost such as salaries, salary related contributions, energy, communication, amortization, utilities, purchased services etc.



Example for a product price calculation using the indirect cost data developed

Category: Budgeting Methodology

The example illustrates the price calculation for a mechanical part which is machine worked on the machines of productive activity 1. The cost intensity is measured through machine hours (0.05 h per item).



Ability of the system to trace indirect cost to productive activities and vice versa

Category: Budgeting Methodology

The indirect costs which a company has to spend to keep its operation going are not a predestined fact and no legacy from the past.



Planned plant capacity utilization, variable and fixed cost

Category: Budgeting Methodology

When using quantities for indirect cost planning (i.e. in the example 36,000 machine hours for production activity 1, 9,000 machine hours for production activity 2, 180,000 m for production activity 3, 18,000 operator hours for production activity 4), these quantities have to originate from the annual production programme.



The problem of indirect cost allocation to products – selection of an adequate allocation base

Category: Budgeting Methodology

A cost calculation which aims to give management adequate information to act in the market economy (where the precise knowledge of product cost is essential), realizes this allocation by choosing allocation bases which as close as possible reflect the cost intensity of the processes and of the auxiliary services which they require.



The problem of indirect cost distribution – relating indirect functions to the productive tasks performed

Category: Budgeting Methodology

Indirect costs, independent from the purpose they serve, are incurred as types of cost i.e. salaries, salary related contributions, energy, communication, amortisation, utilities, purchased services etc. In total, 58 are listed as lines on the.



Description of an adequate indirect cost planning and distribution system

Category: Budgeting Methodology

The complexity of budgeting for overheads (i.e. indirect costs) stems from the fact that overhead costs are not connected directly to individual products, orders or services as are direct costs.



Methodology for indirect cost planning

Category: Budgeting Methodology

The methodology presented in the following summarises solutions which have been developed in several Ukrainian companies faced with problems of indirect cost planning, allocation of indirect cost to the productive activities and product pricing.