Hello Everyone,
I am looking for some brainstorming ideas.
Imagine a company with 3 different types of business, and it needs to allocate the company overhead to each type.
Type A has little or no Direct labor, almost all OH and GA labor and Direct equipment (sales).
Type B has little or no direct equipment, little OH and GA and almost all direct labor (services)
Type C is a repair business, lots of OH waiting around for jobs to do but mostly DL when there is some jobs.
When I allocate OH based on Direct labor, type B is getting way too much of the cost. I know first hand because there is little to none true overhead. For example, type A gets 90% of office rent of B but they are in a completely different state.
If I allocate OH based on direct equipment then Type A gets way to much.
If I allocate based on revenue it seems more fair, but I dont know if that is allowed or if any company really does that.
Any Ideas? Input? What are some alternative ways to spread the OH cost? Thanks
I am looking for some brainstorming ideas.
Imagine a company with 3 different types of business, and it needs to allocate the company overhead to each type.
Type A has little or no Direct labor, almost all OH and GA labor and Direct equipment (sales).
Type B has little or no direct equipment, little OH and GA and almost all direct labor (services)
Type C is a repair business, lots of OH waiting around for jobs to do but mostly DL when there is some jobs.
When I allocate OH based on Direct labor, type B is getting way too much of the cost. I know first hand because there is little to none true overhead. For example, type A gets 90% of office rent of B but they are in a completely different state.
If I allocate OH based on direct equipment then Type A gets way to much.
If I allocate based on revenue it seems more fair, but I dont know if that is allowed or if any company really does that.
Any Ideas? Input? What are some alternative ways to spread the OH cost? Thanks