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 :-)
- How much to charge? 651 10
- break even point 978 30
- PAYE NI 49 1
- Liability account to deal with loans from owner 50 1
- Trustee in Bankruptcy 141 5
- Accomodation and travel 186 1
- Unpaid Fee's 288 6
- Issue with a software supplier 177 4
- Tax relief for backdated pension contributions 204 6
- Is there a requirement to clearly state the amount of a bill? 274 5
- Limited Company trading status. 224 6
- VAT flat rate scheme 91 1
- Failure to operate PAYE 1,589 29
- Alphabet shares dividend paperwork 132 2
- Aquisition Value 114 3
- Does anyone know how to deal with crowd funding income 377 8
- When should i raise VAT invoice after pro-forma payment received? 428 12
- Dividends 279 3
- SA302s - Lenders to accept non hmrc copies 800 13
- Collecting cash on behalf of another business 171 4
- Possible Partnership? 507
- Lunatics in charge of the asylum - Bluestone 486
- Tax and accounting treatment on long lease granted from freehold 463
- New Fangled Penalties 302
- Clubs and Taxable Income 255
- Purchase of property freehold - capitalisation of costs 254
- Deferring taxable income until after 5 April 244
- Loans to other companies 190
- Tasbook email configuration 180
- Closed PAYE schemes and auto enrolment 163