Overhead Allocation in Costing. ABC
ANDRES PENAGOS, Financial Consultant, Colombia
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?