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As shown in the picture below, my task is to calculate direct and indirect costs using this table at first. Further I have to do the calculation according to Direct costing, Standard costing and ABC methods.

I have done the first part of the calculation (in red), however I realized that I have an array of problems with indirect costs as it is not written anywhere how to do the task properly according only to the data in the first part of the table.

Recently I asked this on Economic SE and was advised to post this issue here.

I would really appreciate some sort of help regarding indirect costs.

  • The organisational cost are the indirect costs w.r.t. projects and products. If you don't have any further information, you'll have to come up with a solution to distribute them among the existing products / projects...
    – Tob
    Dec 10 '15 at 21:13
  • 1
    I'm voting to close this question as off-topic because it is not about Project Management, despite the fact that sometimes PMs have to work out budgets and costs.
    – Marv Mills
    Dec 11 '15 at 10:27
  • This is a common/standard procedure; our backoffice/business development people have standard formulas for this - but it generally is done during contract development, not during project management. Interesting problem, but not really within the purview of the project management I've done. That said, there are some project managers with this problem, so I'm not going to vote to close.
    – MCW
    Dec 11 '15 at 12:26
  • 1
    Cost-accounting is a finance activity, not a project management activity. This question should be directed to your CFO or an accounting professional within your organization.
    – Todd A. Jacobs
    Apr 10 '16 at 20:07

One simple mechanism that could work is that after all the indirect costs are calculated, allocate those costs (either as a % overhead, or absolute overhead) on all resource costs in that product/project, product/project group, location, department or company.

In the simplest configuration, if you take the total column on the far right (the second last, not Overall), and sum them up, and then divide the sum by all your resource costs involved with Product 1, 2 and 3. That becomes the overhead on those resource costs. At this point, you have accounted for all overhead costs, at the overall organization level, but you have not done it very specifically for each product. But you can then take this idea, and if the "total" column on right can be product/group/department specific, then you can do that analysis a bit more specifically.

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