Selling And Distribution Overhead
Selling overhead relates to the expenses incurred for promoting the marketing of the products, securing and executing the orders. Distribution overhead is the cost of delivery and despatch of finished products from the factory to warehouse and from warehouse to customers, and includes the cost of bringing returnable containers, if any, to the factory till they are ready for reuse. Examples are carriage and freight, depreciation of delivery vans, repairs and maintenance and insurance of delivery vans, warehouse rent and expenses, transit insurance of finished goods. Selling and Distribution are therefore, two distinct functions, but in most of the organisations, they are grouped together as selling and distribution expenses for the purpose of accounting and control.
Accounting of Selling and Distribution Overhead
Accounting of selling and distribution overhead start with the collection of expenses under clearly defined cost account numbers. These expenses are, thereafter, allocated and apportioned to various functions which may be grouped under the following headings:
Each of the above functions can be further divided into various territories, such as North,
South, East, West, etc. and expenses can be allocated and apportioned to each of these territories for accounting and control. Some of the expenses such as sales commission, travelling expenses of the salesmen, shipping cost, direct selling expenses are identifiable and therefore, can be allocated directly to the function and territories. Other expenses can be apportioned on some suitable basis.
Control of Selling and Distribution Overhead
Control of selling and distribution overhead is a difficult task because of the nature of expenses. The incidence of such expenses mainly depends on external factors, such as market location and competition, customers behaviour, prevailing terms of sales, etc. on which management has no control. Sales promotional effort differs widely between products, customers and territories. It is often difficult to match the cost with results. In spite of the aforesaid difficulties, the following methods may be used for controlling them: