Polish company Netwise S.A. joins the collana Group
Home / Polish company Netwise S.A. joins the collana Group The
Paul M.
13 August 2026
Cost control is a key factor in the success of any business. Overheads play a particularly important role in this regard – as they are incurred in almost every business but cannot be directly attributed to a specific product or service.
These indirect costs affect not only pricing but also the overall financial performance of businesses.
Overheads are costs that are incurred by the company but cannot be directly allocated to a specific product or order.
Typical examples:
These recurring costs account for a large proportion of the total costs. In cost accounting, they are therefore allocated to different departments or areas of activity using methods such as cost centre accounting – before ultimately being allocated proportionally to the products or services.
Because they have a direct impact on pricing and, consequently, on your company’s competitiveness. If they are allocated incorrectly or inaccurately, this can lead to incorrect prices – and, in the worst case, to losses.
Accurate recording and realistic allocation of overheads are therefore crucial to your company’s profitability.
Unlike Direct costs, which can be directly attributed to a product or service, require Overheads specific allocation methods. And this is precisely where cost centre accounting comes into play.
In this process, overheads are first allocated to various cost centres such as production, administration or logistics. It is only in the next step that these costs are allocated to cost objects – that is, to specific products, orders or services.
A key tool in this process is the Operating Statement (BAB). It helps you to allocate overheads systematically and transparently to the correct cost centre and department.
This allows you to allocate energy costs incurred in the production hall directly to the relevant „Production“ cost centre. This ensures transparency – and ensures that overheads are ultimately allocated to products in a fair and realistic manner.
The Cost centre accounting This therefore provides the basis for accurate costing and fair prices.
In order to allocate overheads effectively to products or services, the so-called Overhead charge rate. It shows how high the overheads are in relation to direct costs – and helps to calculate prices fairly and realistically.
The formula: Overhead surcharge rate = Overhead costs / Direct costs × 100
Imagine that your company has:
The surcharge rate is then calculated as follows:
In other words, for every euro of direct costs, there are 50 cents of overheads. This figure is factored into the pricing calculation to ensure that your products or services also cover the indirect costs.
The overhead surcharge is a key instrument of the Cost Centre Accounting. It ensures that the total costs are allocated fairly across your products – and that you calculate your prices in such a way that they are economically viable and based on a realistic overheads surcharge.
This is the only way to ensure that not only direct costs but also the often hidden overheads are covered.
A furniture manufacturer produces two product lines – office chairs and conference tables. The rental costs for the production hall (classified as overheads) are allocated between the two areas on the basis of the square metres used. By applying an appropriate overhead surcharge, the company can calculate its prices realistically and remain competitive.
Overhead costs can be categorised not only by their source, but also by how they are allocated and their behaviour within the organisation. Here is a concise overview of the key categories.
Overhead costs can be divided into two main categories: primary and secondary overhead costs.
Primary overheads arise from external expenditure that flows into your business from outside. This includes, for example, rent, administrative salaries or energy costs – in other words, everything that comes directly from outside and affects the running of the business.
Secondary overheads arise from internal services. For example, when the central IT team provides services to other departments, this usage is charged – and recorded as secondary overheads.
Actual overheads cannot be directly attributed to a specific product or order – for example, executive salaries or office costs. They relate to the business as a whole and are incurred regardless of individual projects.
Fictitious overheads could, in theory, be allocated directly (e.g. small parts in production), but for practical reasons are treated as overheads across the board. This saves effort – particularly where the amounts involved are very small.
Fixed overheads remain constant – regardless of how much you produce or sell. Classic examples include rent, insurance and fixed salaries. They provide planning certainty, but also result in fixed cost blocks when capacity utilisation is low.
Variable overheads rise or fall in line with production volumes. A typical example is electricity costs, which increase as machines run for longer. These costs are more flexible, but also more heavily dependent on the order book.
Direct costs are directly attributable – such as the cost of materials for a product or services, or wages in the manufacturing process.
Overheads relate to several products or services at the same time and must be allocated using allocation keys or mark-ups.
These distinctions are fundamental to cost accounting – and, ultimately, to fair and economically sound price calculation.
The allocation of overheads is often complex – and that is precisely where the risk lies. Errors in allocation or methodology have a direct impact on cost accounting and price calculation. The following points are among the most common pitfalls in practice:
Anyone who accurately records overheads, analyses them regularly and allocates them systematically lays a solid foundation for sound business decisions – from product costing to strategic planning.
In reality, you will encounter overheads in a wide variety of areas within a business. They are incurred without being able to be directly allocated to a product or order – yet they are nonetheless essential to business operations.
Practical examples:
These examples illustrate just how versatile and relevant overheads are to your company’s cost structure.
Keeping track of your overheads is not just a tedious extra – it is a key element of cost accounting and a genuine driver of long-term business success. After all, only by knowing where and why certain costs arise can you take targeted action to counteract them, optimise processes and set your prices in a way that is both realistic and profitable.
With a clear structure, automated distribution and good planning, you can:
Those who keep their overheads under control make better decisions, operate more flexibly – and gain a genuine competitive advantage.
The reliable allocation and distribution of overheads requires not only expertise – but also the right software. With collana diva now, our ERP solution for the retail sector, allows you to automate precisely these processes efficiently and in a traceable manner.
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