While the costs associated with the purchase of raw materials and materials, remuneration of workers who produce a certain product, commissions paid to sellers, it is quite easy to relate to the cost of production and allow you to determine the profitability of sales, such costs as, for example, renting office space, to spread various goods are quite problematic. Costs of this kind are known as overheads, and they are usually deducted from the total revenue of the company before the net profit is calculated.
However, this approach is not quite 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, turns out to be the most unprofitable. If the decision on the company's product policy is made without taking into account overhead costs, then the results, to the surprise of the managers, can be rather disastrous.
However, before you figure out how this can be, you need to determine the composition of the overhead. In fact, it is largely dependent on the nature of the enterprise, however, some traditional overhead costs can still be identified. This is, first of all, everything related to management expenses, such as office rent, purchase of computers, salaries of managers, etc. In addition, this includes the depreciation of production equipment, the cost of storing goods in a warehouse, insurance, etc. As you already understood, the general logic is that overhead costs are expenses that cannot be attributed directly to a particular product, according to the classical accounting rules.
However, is it really impossible to do? In fact, according to the latest trends in management, overhead costs are not only possible, but you should also try to distribute them among various goods from the company's assortment. Of course, this cannot be done without error, therefore, this form of accounting will not work for tax reporting, but it will be very effective for internal use. True, this will have to work a little.
All you have to do is try to determine in what proportion your overhead costs can be distributed across different products. The easiest way offers you to divide all the costs according to the working time that the workers directly producing the product spend on its production. This method allows you to more accurately see the real value of the costs that the company incurs to produce one unit of a particular product, but the result is still quite inaccurate.
If you want to see reliable figures, then you will have to analyze each of the varieties of overhead costs for what product they can be attributed to. Suppose these are the costs associated with a customer service. You can calculate the percentage of what product customers call the service, multiply this percentage by the total amount and add the resulting numbers to the cost of each product. If we are talking about depreciation of equipment, then you can carry out the separation of overhead costs according to production volumes. The salary of marketers can be divided according to which products they directly work on the market.
By a similar principle, you can distribute all expenses. The resulting result will definitely surprise you. Quite often, outsider products with high cost are, in fact, the most profitable products. Having built your product policy on the principle of roll-over distribution of overhead costs, you can achieve truly outstanding results.