Material overhead

The sum of material overheads includes all costs that are incurred in connection with the material, but are not related to a specific product. They comprise several components and can therefore not be assigned directly to any cost center.

Definition / explanation

The material overheads include, among other things, storage costs as well as packaging and shipping costs. Personnel costs and depreciation of the production facility can also be added.

An annual cost center plan is required to determine the material overheads. A material overhead surcharge is calculated to determine the sum of the costs. In order to obtain this, the material overheads are compared with the annual material consumption. This surcharge is added to the material used. From the sum of the material overheads and the Direct material costs the operating cost accounting then results in the material costs that are necessary for the manufacture of a product.

Difference to direct material costs

the Direct material costs stehen mit einem bestimmten Produkt in Verbindung und werden dem jeweiligen Payers assigned directly.

Sie gehören zu den Manufacturing costs und sind die Grundlage der Materialgemeinkosten. Hingegen können die Materialgemeinkosten keinem einzelnen Produkt zugerechnet werden. Der Inhalt dieser Kosten ist sehr umfassend und somit ist keine direkte Kostenstelle für sie zuständig.

Examples of material overheads

  • Rent e.g. for storage rooms and offices
  • Employee salaries: purchasing, warehouse, receiving
  • Depreciation of furnishings and buildings
  • Testing costs

Material overhead in commercial law

Commercial law is to be taken into account for both material direct and material overheads. The regulations for this are set out in the Handelsgestzbuch, or HGB for short. Section 255 (2) sentence 2 contains important entries for material overheads, according to which it is imperative to add these costs to the calculation of production costs. This is essential so that, for example, end products can be taken into account in the balance sheet.

Summary

  • Material overheads are not associated with a specific product
  • there is no direct payer
  • Material direct costs and material overheads together make up the material costs
  • the regulations for material overheads are set out in the HGB
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