Overhead Costing - Food Manufacturing

Activity Based Costing
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Sara Wietecha
Accountant, United States

Overhead Costing - Food Manufacturing

The company I work for manufactures food. The company is small. How much overhead should I count into my costing?
I do not want to put too much in so I don't overcharge the customers when I price them.

  Joseph Rivera
Manager, Philippines
 

Overhead on Costing - Food Manufacturing

Overhead allocation is an ABC strength but it is not for everyone. If you have multiple products and a significant overhead then do consider ABC. You can look up activity-based pricing that can fairly allocate overhead and reduce over-charging for some of your customers.

  ANDRES PENAGOS
Financial Consultant, Colombia
 

Overhead Allocation in Costing. ABC

I have had experience in manufacturing companies, and distributing overheads has to be carefully analyzed in order to be just fair with all products (and services). Obviously overhead is part of the formula to calculate your prices, because all money that has been spent has to return when you sell all your products.
Consider this: it is not fair to send more overhead to products of a specific process when you increase productivity. If you produce more why to punish that productivity?

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