Every business leader should probably have at least a rudimentary understanding of accounting. It’s not about becoming an accountant; it’s just about knowing enough not to get fooled or fool yourself.

Allocating direct costs to production is pretty straightforward -- you know what the materials and direct labor costs. The hard part is determining the amount of overhead to allocate to finished goods ...

The most common mistake is allocating overhead as a percentage of job cost. This practice is so universal that we rarely meet a contractor who veers from it. For example, assume a painting contractor ...

Overhead allocation in construction is a way to share costs across multiple jobs. Why on earth would you do that? Simple: these are the costs your projects share responsibility for anyway — they’re ...

Identify cost driver for the overhead cost, and the total amount of cost driver in a multi-product production or multi-service offering. A cost driver is a business activity responsible for change in ...

We lost a little bit, but the job still made money.” As a construction business owner, you know that “making money” at the project level does not necessarily equate to a profit on the project after ...

There are many costs associated with running a business, but all of those costs don’t fall into the same bucket. One type is overhead costs, which are expenses not tied directly to the production of a ...

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and ...

Overhead rate is a measure of a company's indirect costs relative to another input or metric. Learn how overhead rate is calculated and why it's important to track. Overhead rate is a ratio of a ...

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and ...