Treating Overhead costs as a Cost of Goods Sold in Accounts Business

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  • Updated 5 years ago
A caller recently posed this question:


"One of my sources of income is my tractor service.  I would like to know how much money is mine from each job.  My fee is by negotiation, but let's say  it is $100 per hour.  This is not my real income – its my business revenue.  Out of this fee I must cover many expenses that are not directly associated with this particular job but must contribute to my running the tractor and the tractor service.

"I can work out my fuel cost for this job fairly accurately, but how do I build in 'overheads' on a job by job basis?

“In my case I have to take into consideration:

  • the interest on the loan to buy the tractor;
  • maintenance costs on the tractor;
  • insurance costs;
  • licence costs.

"How do I factor these costs into a "Cost of Goods Sold" so that I can get a fair idea of how much money is really mine – what is my ‘Gross Profit’ on this job?"


Now a couple of methods come into my mind, but none of them are straightforward or simple.

How do you handle this or similar issues?

How would you go about this problem?

I invite you to share your thoughts and experiences.


regards,

John.

 

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Reckon FAQs, Employee

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Posted 5 years ago

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