Ask the Accounting Community

  • 1.  Rule to determine Indirect Cost of Sales Overhead

    Posted 10-30-2014 11:05 AM
    I'm looking for a standard rule to determine what costs should be included in indirect cost of sales overhead.  For example, should the VP of Manufacturing be COS or Functional expenses?  Should the cost accounting function be part of COS or part of general overhead?

    I've heard companies using a rule of 2 steps removed from the production line, so therefore the neither would not be included in a large organization.

    ------------------------------
    Corinne Angotti CPA, CIA
    Director/Manager
    Racine WI
    United States
    ------------------------------


  • 2.  RE: Rule to determine Indirect Cost of Sales Overhead

    Posted 10-31-2014 08:48 AM
    Corrine,

    If you click on this link it will download my IMA Statement on Management Accounting titled :"Implementing ABC." It describes the concepts and principles for tracing and assigning indirect and shared expenses to products, standard services, channels and customers.

    http://www.garycokins.com/images/pdfs/Cokins%20IMA%20SMA%20Implementing%20ABC.pdf



    I welcome answering further questions after you have reviewed it.


    Gary

    ------------------------------
    Gary Cokins
    Director/Manager
    Cary NC
    United States
    ------------------------------


    Original Message


  • 3.  RE: Rule to determine Indirect Cost of Sales Overhead

    Posted 11-01-2014 11:59 AM

    The IFAC's (www.ifac.org) PAIB sector published in July 2009 an International Good Practice Guide titled "Evaluating and Improving Costing in Organizations". One could download free-of-charge from its website - I am assuming it is still available. Happy to send you a copy, if you cannot find.

    It also identifies that "Activity-based costing (ABC)" addresses certain weaknesses of traditional absorption costing and identifies the most appropriate way of tracing and assigning indirect and shared expenses (commonly referred to as overhead) to final cost objects. Its sophistication is for the benefit of management.


    ------------------------------
    Clifford Moggs CMA
    Consultant
    Reading
    United Kingdom
    ------------------------------


    Original Message