Cost Accounting Overheads
Overhead cost centers are an quick and easy way to spread
costs out over groups of related cost centers with a preset percentage being
allocated to each cost center. This is especially helpful in
situations where you may not have the exact dollar amount to apply to each
and every cost center.
User Definable Overhead Types
Two common types of overheads are defined when the software
is first installed: Ranch and Crop. You can use these or change them
to suit your needs. Two additional overhead types are available for
you to use. This means that each cost center may have up to four
different overhead cost centers assigned to it. (In addition, there is a
general overhead calculation for allocating non-crop expenses.)
Multiple Overhead Levels
Multiple overhead levels can come in handy in certain
situations. For instance, if you are growing citrus and have a Crop
overhead type, you might set up four different crop overheads: All
Citrus, Oranges, Lemons, and Grapefruit. (See diagram below.)
An expense coded to "All Citrus" will be allocated
down to each grove. If you have an expense that you want to apply only
to oranges, using the "Oranges" cost center will split the total
cost up among just the three orange groves.
The percentages in the chart refer to the percentage of the
immediate overhead's expenses that are applied to that cost center. In
other words, if there was an expense of $1,000 coded to "All
Citrus", the "Oranges" cost center would have 45% ($450)
allocated to it. Of that $450, Grove 1 would have 33%, or $148.50,
allocated to it.
The allocation calculations are
performed when cost accounting reports are printed. You have the
flexibility of adjusting the percentage allocations and rerunning the cost
accounting reports to view the new results without making
any other changes.
Overhead Types
Here are some examples of the types of overhead cost centers
you might use:
-
Ranch
Crop/Commodity
Variety
Location
Status (Non-developed/Developing/In Production)
Of course you can define what types of overheads you want to
use, which may depend on the commodities you grow, the size of your
operation, etc.
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