Are staff wages a direct cost or operating expense?

[ph001]

Hi all,

As per the title really. I run an electronics repair business consisting of 2 admin staff, 5 service engineers and 3 directors.

In terms of the accounts, what staff wages would count as direct costs and what would be classed as operating expenses.

I keep getting conflicting information!

 

[MyAccountantOnline]

Hi all,

As per the title really. I run an electronics repair business consisting of 2 admin staff, 5 service engineers and 3 directors.

In terms of the accounts, what staff wages would count as direct costs and what would be classed as operating expenses.

I keep getting conflicting information!

It depends what work they do generally direct costs will be staff making the product/providing the service and admin will be support staff.

 

[dp0848]

I agree with Nicola. You may wish to consider using three salary nominal codes in your accounts. One for the directors (overhead), one for support staff (overhead) and one for the engineers (direct cost).

David.

 

[ph001]

OK, thanks for the replies. In my mind I had all staff down as fixed overhead, mainly because (in the short term at least) I have to pay them all independently of whether or not we have sales output.

I suppose in the medium term then they would not be required and be made redundant but that could also be said of the admin function which is directly linked to output.

It's not clear cut to me at all!

 

[elaine@cheapaccounting]

It's not clear cut to me at all!

accounting isn't

if you are working out profit or pricing a job then include all costs that go towards delivering the product!

 

[MyAccountantOnline]

Of course at the end of the day when you look at the bottom line ie net profit/loss it doesnt matter where you put the expense as long as its there somewhere

 

[dp0848]

Of course at the end of the day when you look at the bottom line ie net profit/loss it doesnt matter where you put the expense as long as its there somewhere

Only useful from a management accounting aspect really.

 

[elaine@cheapaccounting]

Most important for pricing decisions