Indirect costs and the main means of distribution

Indirect costs - it costs the company incurred in the production of several types of products, they can be called general administrative expenses.They are one of the most important elements in the calculation of production costs.

still accounting for the question remains about how to properly allocate indirect costs and which method to choose.Whichever particular method is chosen, there is always a percentage of distortions and inaccuracies.In connection with this task of qualified experts consider the adoption of an optimal solution that would help minimize such deviations.In addition, the competent employee at the rational approach can greatly improve the quality characteristics, reflecting the effectiveness of the primary activities of the enterprise.

So, the indirect costs include the costs of labor organizations, administrative staff, all the costs of utilities, rents, maintenance of equipment and buildings.These types of expenditure can not be directly attributed to the cost of production,

so the accounting department staff first accumulate the money in a separate account, and then from the total amount made posting on specific articles and types of products.The secret of success lies in the proper selection of specific proportions of distribution.

course, primarily accountant develops and approves the planned flow rate, which subsequently have to stick to the workers.For example, the allocation of indirect costs in terms of the use of equipment involves estimation of costs per hour attributable to certain types of machines.Thus, spending on support machines and other appliances in working condition is determined by proportional to the installed base.As such, often used the wages of workers engaged in primary production, the estimated rate element.

Let us consider the distribution system, depending on the salary.In order to calculate the indirect costs, it is necessary first of all to collect data on the main wage workers, marked in the primary documents of the company.Next, the analytical work aimed at establishing the percentage of actual costs, and salary.We get a coefficient value by which to make the posting of certain types of products and types of work.That is, find the proportion of the costs of manufactured goods.

above method is simple enough to use, so it is used in most enterprises of our country.However, in modern conditions, it has significant disadvantages as the indirect costs are largely dependent on the degree of automation of the production process.Accordingly, the more the company makes use of new information technologies, the less of these costs falls to production.

Among other methods of cost allocation can be noted, and other, mainly depending on the selected base.For example, as a proportion are the following:

  • production volume (used in metallurgy and food industry);
  • cost limit value (corresponding chemical entities);
  • volume rate for each shop individually;
  • for parking hours.

Finally, we note that indirect costs should be considered as an effective tool for improving the production process.And with the right approach to it you can significantly improve the financial position of the company.