The final category of costs include the overhead costs incurred in running the community. Overhead costs refer to any costs that cannot be directly attributed to a single activity performed by the organization and are, thus, spread over all the organization’s activities.
It is tempting to ignore the allocation of overheads; however, this leads to a mistaken understanding of the costs incurred in running the community. There are two types of overhead costs, namely fixed and variable. Fixed overhead costs are those which remain constant, even as production increases. This typically includes rent, depreciation, insurance, cleaning, etc. Variable overhead costs are those that increase with the scope of the project. For example, this would include supplies of stationery, repairs, coffee in the kitchen, etc.
Ideally, an individual would be able to use what percentage of the overhead costs should be assigned to the community project based upon the community’s scope, number of people involved, time required, etc. Practically, it is more likely to be assigned by the accounting department.
(% of fixed overhead costs)
We have included a breakdown of overhead costs below:
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