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What are Administrative Overheads?
Administrative overheads/ costs are the ones not incurred directly for production of goods and services. However, you need to incur them to support your production, sales, admin and other activities. Without these overheads the organization itself will not stand to perform the required direct operations. Common categories of Administration Overhead/ Expenses would be:
- Office expenses, including for Upkeep & maintenance
- Salaries, wages and commissions of employees
- Costs incurred due to administrative travel and entertainment
- Telephone/Internet bill payments
- Utility expenses for Administrative facilities
- Any other Establishment Costs
- Legal and audit fees
Difficulties faced in Administrative Overheads/Costs Assignment Help
The first problem is to tell the Administration Overheads from Production and Selling overheads. A proper classification often needs you to scan with a toothcomb. Then stratify the expenses under proper sub-heads.
Then comes the challenging task of reallocating them into production/output centers or responsibility centers for eventual consolidation into product/service costs. Different bases of allocation, as Labor Hours, Machine hours, Service time or space etc. may get used for this. Methods of allocation involves application of different techniques like Step-down method, Simultaneous Allocation method etc. A flare of the day is the ABC or Activity Based Costing method, which handles cost allocation in a more structured and scientific manner.
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