How To Calculate Distribution Costs

Table of contents:

How To Calculate Distribution Costs
How To Calculate Distribution Costs

Video: How To Calculate Distribution Costs

Video: How To Calculate Distribution Costs
Video: Distribution Cost Key Components 2024, March
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Circulation costs imply costs that are associated with the process of movement of goods from producers to consumers and are expressed in monetary form. At the same time, they can be planned, accounted for and shown in reporting in absolute amounts (in rubles) or in relative values (in percent).

How to calculate distribution costs
How to calculate distribution costs

Instructions

Step 1

Group distribution costs by purpose and direction of individual costs. Calculate the following costs: transportation costs; deductions for some social needs; labor costs; depreciation of fixed assets; equipment repair costs; payment for the rental and operation of office space, equipment, cars and inventory; the cost of paying interest for the use of credit funds; expenses for fuel, electricity, gas for production needs; advertising costs; expenses for storage, sorting, part-time work and packaging of goods; the cost of purchasing containers; land tax; on-farm deductions and other expenses.

Step 2

Calculate the total cost. To do this, add up the fixed and variable costs. Fixed costs include costs that do not depend in the short term on the amount of products produced by the enterprise. In turn, variable costs are those costs that depend on the volume of production.

Step 3

Note that fixed costs consist of the opportunity cost of the share of finance capital invested in the company's equipment. The value of this cost is equal to the amount of money for which the founders of the company could sell this equipment, and invest the resulting profit in a more attractive investment business. These include all the costs of raw materials and energy. The largest portion of variable costs will typically be in materials costs.

Step 4

Determine the level of distribution costs, which is equal to the ratio of the sum of distribution costs to the amount of turnover, expressed as a percentage. This indicator will allow you to characterize the quality of the enterprise. The better the company works, the lower should be the level of its costs involved in the appeal.

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