Hello friends, today I am going to tell you what are Contingencies charges and overhead charges?: If you also want to know, then keep reading this article completely.
What are Contingencies charges?
Contingencies charge – As the name suggests, these are the expenses that are incidental to some work. For example, when we start some work, it may have to be changed a little, or there may be an increase in the prices of materials or labor charges. In this way, keeping all these things in mind, some percentage value is added to the cost of material and labor charges. Usually, contingencies are included in the range of 3 to 5%. The amount required for the establishment of any establishment or establishment is calculated. Still, sometimes due to sudden increase in prices, the expenses may increase suddenly, such as a sudden increase in the price of petrol-diesel and an increase in tax on other material products. For this sudden expenditure, an additional value of 2 to 6% of the cost should be added to the estimated cost so that the implementation of the project is not hampered due to the sudden economic load.
- Read more:: what is filter circuit?
What are the overhead charges?
Overhead Charges -In addition to the direct material cost and direct labor cost involved in any work, the cost incurred in running the work, installation, project, or production smoothly is called an overhead charge or overhead cost.
Under overhead charges, indirect material cost, indirect installation or office expenses for project or production, etc., electricity and water expenses, call of quotation, and receipt of the tender are included, and total charge overhead charges or costs up to 10 or 11%.
The overhead charge includes the following expenses
(a) Office expenses
(b) Electricity cost
(c) cost of cleaning
(d) the cost of the material brought to the market
(e) Cost of receiving tender
(f) Expenses of Advertisement
(g) Expenses of daily allowances to be paid to employees
(h) cost of seminars
(i) Cost of machines, hand tools, and equipment
(j) Cost of repair of buildings
(k) From time to time, the cost of buying new machines in case of damage to machine tools, tools
(l) Expenditure on the water system
Thus, 10 to 12% of the cost comes under the overhead charge. The overhead charges are mainly divided into three expenses which are as follows.
(i) Overhead Charges on Factory or Installation – This charge includes all those charges in addition to the direct cost of the factory or installation, such as electricity-water expenses, building tax, and machinery. Depreciation in the value of equipment and building etc.
(ii) Administrative Overhead Charges – Under this charge, the expenses of officers, employees, clerical class, office furniture, stationery, and representatives are coming from outside, on refreshment, reception, stay, etc., are included.
(iii) Sales Related Overhead Charges – In addition to administrative charges, this charge includes all those expenses involved in transporting the produced material to the worksite, distribution, sending it out, paying a commission on the sale, promoting the material. , during price control, transport expenses, and expenditure on salaries of sales officers.
- Read more: What is Auto Transformer?
Now you must know what are Contingencies charges and overhead charges?