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When calculate the cost for any activity,you will add dry cost to resourses like labors cost,equipments ,transportation.etc. Then you need to calculate the over head of your company in addition to the profet requested by your sponser ,please show the way you calculate this over head?
First the cost of any item is analysed based on material, labour, plant, equipment, transportation and other component requied for execution of the item. After calculating the total cost of the items, overhead is added (preferably8-10%) to cater for all establishment and other related cost of the company. The Contractor's profit will be added to the total of the cost after adding overhead cost.
There is no clear-cut estimation of overhead cost. Overhead costs is the percentage determined by the company to allocate on a certain project depending on its size and direct cost. Overhead cost is the total summation of project management's payroll, transportation, site office maintenance and facilities, testing costs, insurances and many more. Sometimes, it'd go from% to as high as%. Overhead cost can make or break a tender so it is usually determined not by one but by a number of company officials involved in the construction and engineering department and well-experience in the tendering process.
This is one of items in mark up or margin in general overheads.These are costs entitled in administration of company and providing off site services..The allocation of general overhead costs to individual projects and company as whole is decided by management ad part of their Policy.
General overheads will vary with individual firms, but abroad list may include.
Rent. Rates on office and yard.
Fees, salaries and wages for director and office staff.
Office equipment, stationary, postage,telephone,cars.
Office heating, lighting
Insurances on office and staff.
Interest on capital borrowed.
Each contract must contribute towards these costs, the usual method of recovery is to express them in items of percentage of previous years turnover.
For example, last years turnover was2,, and fixed costs1, , then
Divide fixed costs to turnover we get ad8% .
As cost of business and volume of reading fluctuate, a useful tool in ascertaining trading position of firm is break even analysis.
This analysis can illustrate relationship of fixed and variable costs to turnover and can be used to check that volume of trading is sufficient to cover overheads.
