How to calculate overhead costs?

Before you calculate overhead costs, check out branch instructions for the distribution of these costs between different types of products. The application of a method to significantly affect the value of the cost in the reporting period, and therefore the size of taxable profit. The organization determines the parameters, which in proportion will be the distribution costs. Select the best method based on the specifics of your business.

For industries using manual labor appropriate to apply the distribution in proportion to the salary costs of the workers. In terms of sales it is possible to allocate costs in organizations where production has a high degree of automation. Also for such organizations is a suitable method of distribution in proportion to machine hours. In cases where the overhead is much less direct material costs, it makes sense to use as a base for their distribution, the ratio of direct costs of production of the same product to the total.

Large companies producing a wide range of products and has a complex infrastructure it is acceptable to use combined methods.

Before you calculate overhead costs, determine the optimal database distribution for each species. For example, business expenses can be distributed in proportion to material costs, and General – in proportion to the payroll.

To plan overhead expenses, the sum of the total amount of expenses for economic activity of enterprise. Then, calculate the amount of overhead costs to be included in the unit cost of goods manufactured for each item. Their value for the planned cost is determined on the basis of the standards set by the state for specific types of expenditure; the provisions contained in the accounting policy of the organization, which are calculated on the basis of the actual past and planned changes. The period for settlement is determined by the organization itself.