Selling and Distribution Overhead
Selling and Distribution overhead is the combination of two words ie Selling overhead and Distribution overhead.
What is Selling Overhead?
Selling overhead is the indirect expenses incurred for seeking to create and stimulate demand for the product and up to the stage of securing orders.
What is Distribution Overhead?
Distribution overhead is the expenses incurred in connection with execution of an order. It begins with making the packed product available for dispatch and ends with making the reconditioned empty package, if any, available for re use.
Features of Selling and Distribution Overhead
The followings are the features of selling and distribution overhead.
1. These expenses are incurred only for the products sold.
2. The size of the selling and distribution overhead is depending upon the distance of market, terms of sales, behavior of the customer, customer expectation and market condition.
Difficulties in Controlling Selling and Distribution Overhead
The selling and distribution overhead cannot be easily controlled due to the following reasons.
1. Company cannot exercise control over customers and competitors.
2. It is very difficult to estimate the market potentials correctly.
3. Market price fluctuates due to many factors not by single factor.
4. The sales organization capacity cannot be predetermined correctly.
How to Control Selling and Distribution Overhead?
Adopting any one of the following methods may control the selling and distribution overheads.
1. The company may prepare control report. The control report contains the details of selling and distribution overhead. The control report helps the company to compare the actual selling and distribution overhead with the past records.
2. Flexible budgets may be prepared showing the expenses at different levels of activities. Actual expenses are compared with budgeted expenses.
3. Standards may be fixed for the each item of selling and distribution overhead. The, the actual expenses are compared with the predetermined standards.