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 :-)
- Interest on HMRC contract settlement 155 3
- Goodwill gesture for providing work 426 12
- Enquiry into tax return - how co-operative would you be? 317 6
- Share premium or Directors Loan 728 30
- VAT reconciliation and VAT return on Sage 102 3
- What would you do in this situation? 127 5
- Filing a P87 (professional fees) before year end. 129 2
- Recommendations for payroll/AE software? 601 13
- More HMRC on gov.uk 629 11
- Rollover relief - when does gain crystallise in this situation? 83 1
- Offshore company transferring assets to a UK individual. 340 14
- Interest Free Loan - Salay Sacrifice? 241 4
- Research and development - repayment timescale 217 5
- Sole trader hid directorships. 383 6
- Halloween - do you celebrate it? 1,393 46
- NOVA 550 1
- Clearing payments on account/ Sage 50 271 10
- Regional Development Grant 119 4
- Problem ex client...again.. 2,402 21
- Company car without a salary 229 2
- Bonus Bonds 390
- Insolvency and whistle blowing 377
- Transfer of funds into recently set up company 288
- TPR imposes first penalty notice fines 257
- Box 8 VAT Return - deposit payment 186
- Husband proposes to buy the car as Director unable to acess finance 177
- Finance Lease 155
- Company Car Lease 152
- Form 42 147
- Demerger Reserve 130