How are overhead costs tracked in PCMCS?

Overhead costs in Profitability and Cost Management Cloud (PCMCS) are effectively tracked by utilizing predetermined overhead rates that are based on estimated activity levels. This method allows organizations to allocate overhead costs more accurately according to the actual levels of activity that drive those costs.

Using predetermined rates means that companies estimate the total overhead costs and the expected activity level for a given period, which can include metrics like machine hours or labor hours, before the period begins. This approach provides a systematic way to allocate overhead to products or services based on their consumption of the underlying resources.

By employing this method, organizations can achieve a more precise understanding of product profitability, as overhead costs are linked directly to the activities that incur them, rather than relying solely on arbitrary or historical measures. This can lead to better decision-making, strategic planning, and resource allocation. Through the use of these estimates, PCMCS supports firms in monitoring their performance and aligning their operational strategies with financial objectives.