OIXIO | Cost Allocation
What is the profitability of the customer? Is the business line worth it?
Getting answers to seemingly simple questions is not that easy. Sales revenues and direct costs are generally available on a product/customer basis. However, accounting for indirect and overhead costs by product is more complicated. For instance, the cost of the director’s salary is not typically reflected in accounting by product.
With a cost allocation solution, you can set up automatic cost drivers where you list the expenses to be allocated. You then define the proportions for distribution among products/customers. These can be either manual or based on metrics such as sales revenue or quantities sold. The subsequent calculations are automated. On a specified date each month, the system performs the calculations for you, and you can admire the results in your reports.
To calculate the profitability of a department or product, it’s essential to know all costs associated with that department or product.
Sales revenues and direct costs are usually straightforward. However, the situation becomes more complex when we want to include various indirect costs and overheads, such as office expenses, management costs, support staff salaries, etc.
Generally, overhead and indirect costs are not allocated to products and projects in accounting. However, for precise management accounting, it’s necessary to break these down, which is a meticulous task in Excel.
Automating cost allocation increases efficiency
With the OIXIO cost deviation solution, it’s possible to determine which costs are allocated and in what proportions, as well as how they are reflected in reporting. The cost allocation process operates fully automatically, and results can be manually adjusted if necessary. The module consolidates data into a financial management view, providing a real-time snapshot of how the company is performing
Who is it for and why
“This is a company-based subscription package, and there’s currently no better alternative available.”
“The solution is primarily designed for medium to large companies with more complex processes. Micro-enterprises won’t benefit much from it.”
“For large companies with multiple departments or for groups of companies where the performance of each unit needs to be measured separately, this solution is incredibly helpful.”
Additionally, it significantly streamlines the budgeting process and makes management reporting even more accurate by allowing for the inclusion of indirect costs.
The automated management reporting solution helps to:
- Alleviate the workload of accountants,
- Allow project managers, department heads, and those responsible for results to monitor the current status of budget execution and profitability at any time,
- Save employee time and reduce unnecessary manual work,
- Minimize the potential for errors when moving data manually.
This is a company-based subscription package for which there is currently no better alternative. Business software licenses are significantly more expensive. The management reporting solution offers cloud-based management reporting, where data is automatically consolidated and accessible to each manager at a convenient time.
The cost allocation solution provides a system for cost sharing and its implementation.
What is the profitability of a business line or product segment?
Sales revenues and direct costs are available. The complexity arises in accounting for indirect and overhead costs, which requires extensive manual work.
The necessity for a cost allocation system and its automation:
- The ability to identify which revenues/costs are subject to allocation.
- Set up cost drivers that determine the allocation proportions.
- Allocate costs and reflect the results in reporting.
Cost Allocation Solution
- Source data from management reporting or other sources.
- Convenient web browser-based setup for cost drivers: Where, How, When.
- Allocation proportions can be either automatic based on results for the given period or manual.
- Option for stepwise allocation.
- Ability to manually adjust allocation results.
- Fully automated – operates independently during the configured period.
- Full integration with management reporting
Contact Us
OIXIO Group