We're going through a bit of an expansion. As we do so we're expanding both our internal staff, contract staff (within and without the facility), and true outsourced to domestic and international companies. My question is, in doing so I want to best capture the best costing for these activities, without getting excessively complex in my approach. My initial take is to allocate
Allocating overhead cost for insourced/outsourced business.
Answers
Think hard about what value is truly gained from ANY allocations. Unless you have a burning need to move true OH costs to inventory...why clutter both your ledger and your Close process with allocations? In my experience, most of the gains can be realized by an offline analytical effort, consuming far less resources and clearing up a heavy burden on your ongoing routines.
My company has went to a fully loaded cost model in 2014. We are in the service business, so the attempt was to try to drill down to a program level and if that program was making any margin. We allocate as much as possible through direct costs, but the cost centers such as H/R, I/T, etc we look at headcount. Some eye opening results, but we are constantly tweaking the results as they are never perfect.
Keith, I would look at the real drivers of the costs. Ex.
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