<?xml version="1.0" encoding="utf-8"?>
<ManualTopic ID="/baanerp/tp/onlinemanual/000360" xml:lang="en">
   <Header>
      <Title>Overhead costs overview</Title>
      <Keyword type="header" order="d1e2602288">
         <Level1>overhead costs</Level1>
      </Keyword>
   </Header>
   <AimSection>
      <Paragraph>Overhead expenses are indirect costs ( Example electricity) that
		impact all manufacturing costs, except for direct labor and direct material
		that change depending on production volume.</Paragraph>
   </AimSection>
   <GeneralSection>
      <Paragraph>Overheads are costs or expenses (such as for G&amp;A costs,
		deprecation, energy, administration, insurance, rent, and utility charges)
		that:</Paragraph>
      <List>
         <ListItem>Relate to an operation or the company as a unit.</ListItem>
         <ListItem>Do not become an integral part of a good or service (unlike raw
		  material or direct labor)</ListItem>
         <ListItem>Cannot be applied or traced to any specific unit of
		  output.</ListItem>
      </List>
      <Paragraph>Overhead is those costs required to run a business, but which
		cannot be directly attributed to any specific business activity, product, or
		service. Overhead costs do not directly lead to the generation of
		profits.</Paragraph>
      <Paragraph>ERP Enterprise allows you to define three types of Overhead Costs:</Paragraph>
      <List>
         <ListItem> 
            <List>
               <ListTitle/>
               <ListItem>
                  <GUIRef href="" role="manual">Indirect materials:</GUIRef> These are costs that
				indirectly add up to the total cost of an item, such as light, heat,
				supervision, and maintenance.</ListItem>
               <ListItem>
                  <GUIRef href="" role="manual">Indirect labor:</GUIRef> Indirect costs such as an
				hour of labor, administration and general meetings.</ListItem>
               <ListItem>
                  <GUIRef href="" role="manual">Miscellaneous expenses:</GUIRef> Taxes, insurance,
				depreciation, repairs and so on.</ListItem>
            </List>
         </ListItem>
      </List>
      <GeneralSection>
         <SectionTitle>Overhead allocation</SectionTitle>
         <Paragraph>Overhead allocation is a process of identifying, aggregating
		  and assigning indirect costs to activities, for which organizations want to
		  separately measure costs. The outcome of the overhead allocation process are
		  the overhead rates. Predetermined overhead rates are assumed to be calculated
		  in Excel by dividing the budgeted or estimated overhead with the budgeted
		  activity and are used to apply overhead.</Paragraph>
      </GeneralSection>
      <GeneralSection>
         <SectionTitle>Overhead application bases</SectionTitle>
         <Paragraph>For <Link href="/baanerp/tf/glossary/glossary#Batch_tf" role="glossary">batchwise</Link> application of overheads, you must set up
		  bases over which pre-determined overhead rates can be calculated.</Paragraph>
         <Figure space-and-orientation="indented-estimated">
            <HTML:IMG xmlns:HTML="http://www.w3.org/TR/REC-html40" width="600" height="400"
                      SRC="../images/overhead_process.png"
                      alt="[...]"/>
         </Figure>
      </GeneralSection>
      <GeneralSection>
         <SectionTitle>Calculate overheads</SectionTitle>
         <Paragraph>You can calculate overheads on actuals and hard commitments.
		  Set the parameters for overhead calculations in the <GUIRef href="/baanerp/tp/pdm/tppdm0100s000" role="session">General Project Parameters (tppdm0100s000)</GUIRef> session. Note: Hard commitments can
		  only be calculated when the Actuals checkbox is selected.</Paragraph>
      </GeneralSection>
      <GeneralSection>
         <SectionTitle>Apply overheads</SectionTitle>
         <Paragraph>Overheads are applied to price indirect costs of products or
		  projects, so as to cover all costs and thereby generate profits. The result of
		  the overhead application process is that overhead transactions are generated
		  and applied to the related projects and that the journals to be posted to
		  Financials are generated.</Paragraph>
      </GeneralSection>
   </GeneralSection>
   <RelatedTopics>
      <SectionTitle>Related topics</SectionTitle>
      <RelTopic>
         <Link href="/baanerp/tp/onlinemanual/000361" role="manual">Overhead application bases set-up</Link>
      </RelTopic>
      <RelTopic>
         <Link href="/baanerp/tp/onlinemanual/000362" role="manual">To calculate and apply overheads</Link>
      </RelTopic>
   </RelatedTopics>
</ManualTopic>