General Inquiries

Applying indirect costs to projects

  • 1.  Applying indirect costs to projects

    Posted 11-29-2019 10:59
    We are an electrical contractor and apply indirect costs (overhead) to job cost based a fixed rate per labor hour.  I am interested in hearing how other contractors apply indirect costs, and to what (labor and/or material) and why you use your method.

    Lawrence Horning
    Pieper Electric Inc.
    New Berlin WI
    (262) 879-8218

  • 2.  RE: Applying indirect costs to projects

    Posted 11-30-2019 20:51
    Most of my electrical contractors use a combination of a dollar value per hour and equipment burden (mainly truck use).  Depending on how much is over or under-allocated, we then decide whether we are going to take that back against jobs as a ratio or just keep it in with small jobs and not allocate it.  I don't like the use of a percentage rate on labor as labor rates can vary so much.

    Kathe Barrington, CPA

  • 3.  RE: Applying indirect costs to projects

    Posted 12-02-2019 08:57
    We use two dollar values and allocate them for per labor hour, one for employees with trucks, and another for everyone else.

    Christine Kettelkamp CPA, CMA, CCIFP
    Jenco Inc.
    Scottsdale AZ
    (480) 513-1601

  • 4.  RE: Applying indirect costs to projects

    Posted 12-03-2019 08:23
    We used to use a percentage on labor but found that with labor being volatile (often going above or below budget), it was hard to ensure we were accruing enough to cover the expenses. So we setup a model with the percentage of each expense to the cost of the job. I created codes on the job solely for those items and when the job is setup, these accrual codes have budgets representing the total amount of accrual. At the end of each month, I "charge" the job for a portion of the accrual based on the percentage of completion the job is until the accrual codes cost and budget matches (aka, job is complete).

    Stacy Webre
    Vice President of Accounting
    Lochridge-Priest, Inc.
    Waco TX
    (254) 772-0670