Sales Cost And Cost Analysis Pdf


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Img: 1 2 3. Textbook Price: Rs. Sales and Cost Analysis : Overview Control is one of the most critical functions performed by a sales manager as it measures the performance of the system and helps the manager take corrective action if the performance of the system is not in agreement with the formulated plans.

In business, overhead or overhead expense refers to an ongoing expense of operating a business. Overheads are the expenditure which cannot be conveniently traced to or identified with any particular cost unit, unlike operating expenses such as raw material and labor.

Sales and Distribution Management

In business, overhead or overhead expense refers to an ongoing expense of operating a business. Overheads are the expenditure which cannot be conveniently traced to or identified with any particular cost unit, unlike operating expenses such as raw material and labor.

Therefore, overheads cannot be immediately associated with the products or services being offered, thus do not directly generate profits. Such expenses are incurred for output generally and not for particular work order; e.

Overheads are also a very important cost element along with direct materials and direct labor. Overheads are often related to accounting concepts such as fixed costs and indirect costs. Overhead expenses are all costs on the income statement except for direct labor, direct materials, and direct expenses.

Overhead expenses include accounting fees, advertising , insurance , interest, legal fees, labor burden, rent , repairs, supplies, taxes, telephone bills, travel expenditures, and utilities. There are essentially two types of business overheads: administrative overheads and manufacturing overheads. Administrative overheads include items such as utilities, strategic planning, and various supporting functions. These costs are treated as overheads due to the fact that they aren't directly related to any particular function of the organization nor does it directly result in generating any profits.

Instead, these costs simply take on the role of supporting all of the business' other functions. Universities regularly charge administrative overhead rates on research. In the U. For example, Benjamin Ginsberg showed how overhead rates are primarily used to subsidize ballooning administrative salaries and building depreciation, neither of which directly benefit research; although it does benefit the administrators that determine university policy in his book The Fall of Faculty.

An article written by Joshua Pearce in Science argued that overhead accounting practices hurt science by removing funds from research and discouraging the use of less-expensive open source hardware. This includes mainly monthly and annual salaries that are agreed upon. They are considered overheads as these costs must be paid regardless of sales and profits of the company.

In addition, salary differs from wage as salary is not affected by working hours and time, therefore will remain constant. This includes office equipment such as printer, fax machine, computers, refrigerator, etc. They are equipment that do not directly result in sales and profits as they are only used for supporting functions that they can provide to business operations.

For example, for a printing company a printer would be considered a manufacturing overhead. This includes the cost of hiring external law and audit firms on behalf of the company. This would not apply if company has own internal lawyers and audit plans.

Due to regulations and necessary annual audits to ensure a satisfactory work place environment, these costs often cannot be avoided.

Also, since these costs do not necessarily contribute directly to sales, they are considered as indirect overheads. Although in most cases necessary, these costs can sometimes be avoided and reduced. Many companies provide usage of company cars as a perk for their employees.

Since these cars do not contribute directly to sales and profits, they are considered an overhead. Similar company perks that are a one-off or constant payment such as partner contract fees with a gym will also fall under administrative overheads. This will include company-paid business travels and arrangements.

As well as refreshments, meals, and entertainment fees during company gatherings. Although one might argue that these costs motivate workers to become more productive and efficient, the majority of economists agree that these costs do not directly contribute to sales and profits, therefore shall be categorized as an administrative overhead. Manufacturing overheads are all costs endured by a business that is within the physical platform in which the product or service is created.

Difference between manufacturing overheads and administrative overheads is that manufacturing overheads are categorized within a factory or office in which the sale takes place. Although there are cases when the two physical buildings may overlap, it is the usage of the overheads that separates them.

Although the general concept is identical to the example under administrative overheads, the key difference is the role of the employee. In the case of manufacturing overheads, employees would have roles such as maintenance personnel, manufacturing managers , materials management staff, and quality control staff.

It would also include the set wages for janitorial staff members. Once again, the key difference lies in the nature of their respective jobs and the physical location in which their jobs are carried out. This refers to the reduction in value of equipments as it becomes older and more obsolete. For example, if a printer has a potential useful life span of 5 years, the amount that it can be sold for will decrease each year.

Moreover, this also applies to vehicles as they tend to depreciate in value significantly after the first year. When calculating manufacturing overheads, accountants mainly use two methods : straight-line method and declining balance method. Every single property unless government owned is subject to some form of property tax.

In addition, property taxes do not change in relation to the business's profits or sales and will likely remain the same unless a change by the government administration. Unless the business decides to purchase land and build its own factory, it will be subject to some sort of rent due to the amount of capital required to build a privately owned factory.

Therefore, this rent must be paid to the landlord on a regular basis regardless of the performance of the business. Although the rent for the building provides the physical platform for the company to produce its products and services, it is not a direct contributor. This would vary depending on how the utility bill is structured.

In the case of it being an overhead, the utility bill is pre-negotiated meaning that the monthly utility bill will be the same regardless of the amount in which the factory actually consumes.

However, due to the vast consumption of electricity, gas, and water in most factories, most companies tend to not have standardized utility bills as it tends to be more expensive. For most businesses, business overheads are calculated by accountants for budgeting purposes but also often so the business has an idea of how much they must charge consumers in order to make a profit. The following are common accounting tools which take account of business overheads. The break-even analysis determines the point which the business's revenue is equivalent to the costs required to receive that revenue.

It first calculates a margin of safety the point which the revenue exceeds the break-even point as that is the "safe" amount which the revenue can fall whilst still remaining to be above the break-even point. Contribution refers to sales of the product or service, it can also be interpreted as the business's revenue stream. Fixed costs in this case serves the same purpose as business overheads, it will simply be shown as a straight horizontal line on the graph as shown.

In economics, revenue curves are often illustrated to show whether or not a business should stay in business, or shut down. In theory, if a business is able cover variable operational costs but unable to cover business overheads in the short run, the business should remain in business. On the other hand, if the business is not even able to cover operational costs , it should shut down.

Activity-based costing ABC aims to reduce the proportion of costs treated as overheads by allocating costs to each activity involved in the production of a product or delivery of a service. Balance sheet is a financial statement which outlines a company's financial assets , liabilities , and shareholder's equity at a specific time.

Both assets and liabilities are separated into two categories depending on their time frame; current and long-term. Although the balance sheet by itself does not offer much information, it is a useful piece of financial information when combined with other documents such as the income statement or ratio analysis as it offers a diverse and well-rounded description of the company's financial position. From Wikipedia, the free encyclopedia.

This article is about the business term. For the computing term, see Overhead computing. Retrieved The Effects of Lean Manufacturing. RAND Corporation. The Huffington Post. Research giants win on federal funding: Fend off US bid to cut overhead payments. Boston Globe. March 18, ZME Science 3. The Quarterly Journal of Economics. Small Business - Chron. Administrative Science Quarterly. Nov Putting a Price Tag on Perks: Valuing employee benefits.

American Bar Association. Journal of Labor Economics. Dec The Clearing House. July Journal of Accounting and Economics. Archived from the original on Business History Review. Cost Management with a Strategic Emphasis. New Series. American Journal of Agricultural Economics. Journal of Political Economy. April University of New Hampshire Press. University of California Berkeley Press. University of Berkeley Press. Harvard Business Review.

Oregon State University.

Sales and Distribution Management

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4 Comments

Agate B.
07.12.2020 at 05:18 - Reply

CVP analysis requires that all the company's costs, including manufacturing, selling, and administrative costs, be identified as variable or fixed.

Phillip V.
09.12.2020 at 02:48 - Reply

– Order processing expenses: cost of sales & purchase order, billing & receiving payments. – Administration expenses: all cost of sale offices, including executives'.

Yzcosiret
09.12.2020 at 12:56 - Reply

Sales and Cost Analysis: Overview. Control is one of the most critical functions performed by a sales manager as it measures the performance of the system and​.

BenoГ®t L.
11.12.2020 at 10:39 - Reply

Sales & Cost AnalysisDone for sales control: statistical purpose of sales control: A/cg analysis to determine profitabilityWhy Sales Control?1.

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