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 :-)
- Anyone else still working this week? 431 14
- When to provide S419 tax in the accounts 95 4
- Sole Trader change of accounting date 110 1
- How much does the company pay 775 33
- Proof of identification 65 1
- Which tax returns can I submit? 98 1
- Accounting for cash put into Ltd 289 5
- Using home as clients registered address 197 4
- Childcare vouchers 362 8
- Is this a qualifying loan for interest deductions? 79 2
- New Enterprise Allowance 80 1
- VAT Notice 700/64 - claiming VAT on motor repairs 69 1
- two business from one premises 180 3
- VAT transfer on going concern on incorporation 53 1
- SELLING A PROPERTY at LOSS/PROFIT - CAP GAINS ALLOWANCE 240 4
- HMRC property income enquiry 417 9
- 10 Worst xmas presents for an accountant 356 4
- Merry Christmas 138 2
- THEATRE SHOW - HIRE - VAT PAYABLE ON TICKET SALES 96 3
- New Incorporations - ERTNAC hoax - anyone else seen this? 1,104 12
- Accounting referance change & deficient accounts. 507
- corporate hierarchy 472
- Advice - 326
- Anyone had HMRC refusing to act on EPS database glitch? 275
- WWOOFers 265
- The booking.com con 248
- Art Gallery - Splitting a property between business and personal use 246
- Cocaine anyone? 232
- Tax liabilities in USA for warehoused products 221
- UK State pension paid in NZ 177