Allocating production overheads: how to see the real cost of your products
In manufacturing, direct materials rarely tell the whole story. The company pays for rent, electricity, equipment repairs, depreciation, production wages and a dozen other things — but without a proper allocation those amounts sit in general expenses and never reach the product.
That is how a product can look profitable on paper while the real margin is much thinner. QUINCEFIN lets you push those costs into the cost of finished goods, work orders and production write-offs.
The problem allocation solves
If you count materials only, the business never sees its full production cost. A batch might contain UAH 30,000 of materials, but the premises, the electricity, the repairs and the technicians’ time all went into it as well.
The Production cost allocation document moves those costs into the actual cost of production, so the reports show the real economics of the shop floor.
Which costs can be allocated
You can include the production overheads of any period you need:
- rent for the production premises;
- utility bills;
- equipment depreciation;
- equipment repairs and maintenance;
- production staff costs;
- any other expense that belongs in the cost of goods or work.
How it works in QUINCEFIN
- You choose the period whose costs need to be allocated.
- QUINCEFIN pulls in the expense documents that are eligible for allocation.
- You keep only the lines that genuinely belong in production cost.
- You pick the allocation base: direct cost, direct wages or quantity.
- You post the document, and the system adds those costs to the actual cost of production.
After that the manager sees the real profitability of products, work and orders rather than a notional one.
Who benefits most
The feature is aimed at companies that carry production overheads and need to keep an eye on margin:
- food production;
- workshops and small plants;
- furniture manufacturing;
- print shops;
- service centres and car workshops;
- any company that delivers work through work orders.
What the business gets
Allocating production overheads helps you to:
- calculate the actual cost of production more precisely;
- see the real margin on products and work;
- set prices on the basis of full costs;
- spot unprofitable lines of business;
- drop the manual Excel recalculation at month end.
Try QUINCEFIN
If you need to see the full cost of products, work and production orders, QUINCEFIN keeps all of it in one system instead of a pile of manual spreadsheets. There is more about the production module on the Manufacturing page.