managing general overhead costs

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1、CHAPTER9ManagingGeneralOverheadCostsInthischapteryouwilllearnhowtoprepareageneraloverheadbudgetthatisusedtotrackoverheadcosts.Itiseasyforacompanytosquanderitsprofitsbyfailingtocon-trolgeneraloverheadcosts.Constructionmanagersoftenspendenormousamountsoftimeandef

2、fortbudgeting,tracking,andcontrollingconstructioncostswhileignoringgeneraloverheadcosts.Justasaprojectmanagerorsuperintendenttracksandman-agesconstructioncostsonaproject,thegeneralmanagerorownerneedstotrackandmanagethegeneraloverheadcosts.Thekeytodoingthisistos

3、etandfollowageneraloverheadbudget.Ageneraloverheadbudgetisalsoneededtopreparethecompany’sannualcashflowprojection,whichisdiscussedinChapter14.Itisnotuncommonforaconstructioncompanytospend10to25%ofitsrev-enuesongeneraloverheadwhileretaininglessthan5%ofitsrevenue

4、sasprofit.InChapter6wesawthattheaveragecommercialconstructioncompanyspent83%ofitsrevenuesondirectandindirectconstructioncosts,leaving17%tocoveroverhead,paytaxes,andprovideaprofitfortheowners.Withtheaveragecommercialconstructioncompanyearninglessthan5%profitbefo

5、retaxes,thedifferenceof12%isconsumedasgeneraloverhead;inotherwords,overtwo-thirdsofthegrossprofitfromthejobsisusedtopayforthegeneraloverhead.Be-causegeneraloverheadcostsareamajorexpensetoaconstructioncompany,constructionmanagersshouldmanagethegeneraloverheadcos

6、tsjustastheywoulddirectandindirectconstructioncosts.WHATISGENERALOVERHEAD?Generaloverheadconsistsofthosecoststhatcannotbespecificallyidentifiedtothecompletionofaconstructionproject.Generaloverheadmayalsobereferredtoasindirectcosts.Generaloverheadincludesallmain

7、officeandsupervisorycoststhatcannotbebilledtoaspecificconstructionproject.Generaloverheadcostsarecontrolledonacompanywidebasis.Theresponsibilityforcontrollingthesecostsfallsontheowneroftheconstructioncompanyorthecompany’sgeneralmanager.193194CHAPTER9Whenprepari

8、ngbidsforconstructionprojectsalldirectcostsandprojectoverheadshouldbeincludedaslineitemcostsinthebidorproject’sbudget.Thebudgetforthesecostscanthenbemonitoredandtrackeddurin