Depreciation and Costings
I have a particular question about cost accounting and depreciation . This is also tied up with pricing.
The basic question is if, in a job costing system, I should or shouldn't include a depreciation value into the overhead calculation which will then feed into an overhead cost per direct labour hour for a service, not a product company.
The background is this:
I have recently calculated an overhead charge per direct labour hour. This was based on an analysis I made on the previous 12 months figures.
From this overhead charge per direct labour hour, I can calculate how much a job has cost to perform. I use the job's time card plus the cost of the direct materials to determine this.
The price we charge to the customer per job, is on average, the cost price plus 20%.
Recently, we bought a new piece of equipment and this has reduced the time spent on each job in terms of direct labour hours.
This has in turn made the process more efficient and reduced our cost price.
This, based on our sales price formula of cost price plus 20% could, theoretically, reduce the price we charge to our customers.
(This may be good for competition on price, but it doesn't feed the cost of the investment so far as I can see)
My thoughts are that an annual charge for depreciation should be included into an overhead calculation for costing purposes since if this isn't there, the cost of new investment isn't a component of the price charged out.
Any help welcomed :-)
- CT600 220 7
- format cell to exclude decimals 293 16
- Supply of service to EU community body exempt from VAT 20 1
- Suggested tips to become a better accountant? 382 10
- Lease 90 4
- Free invoicing software 477 4
- Community awards 2014 - first category 35 1
- Digita Hosted Software 386 4
- signature required 846 31
- Do most of you still use MS Office? 1,263 21
- Payroll error by client on Moneysoft 148 5
- Thin Client recomendation 196 3
- Mileage allowance payment via payroll 177 5
- VAT Office Grimsby 131 2
- Stock Valuation when a partner dies 104 2
- Inheritance Tax and the 7 Year rule for property as a gift 120 2
- ethical- to continue to act or not? 1,279 15
- Homing sandwiches 841 19
- Flat rate VAT- other income calculation 242 2
- SUSPECTED OR INVALID BENEFIT FRAUD 234 2
- Auto enrolment excuses 1,295
- Feedback on accounts production software for IFRS 848
- Add T&Cs to Sales Order in Sage 537
- Credit where credit's due....... 332
- Buying goods in US and selling them to company in US 251
- TheTax Donut 217
- Double taxation relief - same income, different individual 179
- Semi retired FCA or equivalent 167
- Director's business mileage 142
- Sole trader CPD 140