How do you calculate your overheads?

[Tim-Ellis]

Hello folks,

When my old boss left I inherited his excel spreadsheets for calculating job costings. We have a bespoke MIS with no provision for costings. A few years have passed and a lot has changed in our print shop. I'm starting to wonder if I need to update the formulas.

So costing paper and ink I get, but how do I include all my production overheads? What about the cost of my receptionist and accounts team?

Anyone out there got any advice?

Cheers

Tim

 

[Stephen Marsh]

When I am going through the setup and implementation of our Accura MIS software with a new client, one of the first things we do is get them to work on our Cost Rate Calculator spreadsheet. As you say, working out material and outsourced labour costs is easy enough, it is the internal costs that can be hard to figure out. Internal costs are worked out and covered by an hourly cost rate.

The hourly cost rate needs to reflect the type and size of equipment, the operator’s wages, consumables, and a contribution to the overheads of the business. There are three main factors that influence the hourly rate of an item of equipment: direct equipment costs, indirect costs and projected productive working hours.

Hourly rate = ( (Direct costs + Overheads) / Projected hours ) + % Uplift for downtime

This is where the Accura Cost Rate Calculator spreadsheet comes in. Accura is a “cost+plus” system, so each production cost centre in the business needs an hourly cost rate against it to pay it’s share of the entire business overheads. A markup/margin is then applied over all costs to make a profit.

You may get some clues from the following pages:

http://accuramis.com/what-are-my-cost-rates-c-317.php

http://accuramis.com/cost-rate-calculator-i-5057.php


Hope this helps!


Stephen Marsh