Indirect costs and basic methods of their distribution

Indirect costs are the costs of an enterprise produced in the manufacture of several types of goods, they can be called general economic expenses. They are one of the most important elements in calculating the cost of production.

Until now, for accountants, the question remains as to how to correctly allocate indirect costs and which method to choose. Whichever method is chosen, there is always a lot of distortion and inaccuracy. In this regard, the task of a qualified specialist is considered to be the adoption of an optimal solution that would help minimize such deviations. In addition, a competent employee with a rational approach can significantly improve the quality characteristics that reflect the effectiveness of the main activity of the enterprise.

So, indirect costs include the costs of organizations to pay administrative staff, all costs for utilities, rental payments, current repairs of equipment and buildings. These types of spending can not be immediately attributed to the cost of production, therefore, the employees of the accounting department first accumulate money in a separate account, and then from the total amount posted on specific articles and types of products. The secret of success lies in the correct choice of specific proportions of distribution.

Of course, first of all, the accountant develops and approves the planned value of the expense, which the workers must subsequently adhere to. For example, the allocation of indirect costs in terms of the use of equipment involves a preliminary calculation of the costs per hour, attributable to individual types of machines. Thus, the expenditure of funds for the support of machines and other devices in working order is determined by a proportionally established base. As such, the wages of workers employed in the main production are often used , the estimated elemental rates.

Let us consider in more detail the distribution system as a function of wages. In order to calculate the indirect costs, it is necessary first of all to collect data on the amount of remuneration for the main workers marked in the company's primary documents. Then, analytical work is carried out, aimed at establishing the percentage of actual costs and wages. We obtain a certain coefficient value, with the help of which it is possible to carry out a posting for individual types of products and types of work. That is, we find the specific weight of costs for goods produced.

The above method is fairly simple to use, so it is used at most enterprises in our country. However, in modern conditions it has significant drawbacks, since indirect costs largely depend on the degree of automation of the production process. Accordingly, the more new information technologies are used at the enterprise, the less these costs are accounted for by the products.

Among other methods of allocating costs, you can note others, mainly depending on the chosen base. For example, as a proportion of the following:

• Volume of output (used in metallurgy and food industry);
• Limit value of costs (corresponds to chemical organizations);
• The volume of rates for each shop separately;
• By the machine-clock.

And in conclusion I want to note that indirect costs should be considered as an effective tool for improving the production process. And with a competent approach with the help of it, you can significantly improve the financial position of the enterprise.