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A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs

Improvement of cost management methods is an urgent problem nowadays due to increasing size and share of overhead costs of enterprises in modern conditions. This paper proposes a methodical approach to overhead cost management to find a compromise between cost optimization and differentiation in terms of developing flexible standards that are connected with strategies and specific operating conditions of economic entities. The implementation of these tasks is based on studying the experience of applying and clarifying the category of overhead cost rationing, based on neoclassical and alternative evolutionary economic theories, the economy of the firm to calculate the overhead rate, and econometric methods for analyzing the cost factors of industrial enterprises. A developmental component of overhead costs was first distinguished in the proposed methodical approach. An algorithm to determine the effectiveness of the overhead cost standard factor in terms of compliance with the objectives of the enterprise has been developed. Practical recommendations for optimizing and using the features of the overhead cost standard factor to increase the efficiency of industrial enterprises have been offered. The use of the proposed methodological approach to standardizing overhead costs as a structural component of cost management systems based on norms will increase the reliability of implementing its following stages, develop well-founded norms that are adequate to the various goals of economic entities, focus attention on overhead costs, improve managerial accounting for economic entities, conduct flexible managerial policies, and productively carry out the managerial process.

Overhead Costs, Cost Management, Rationing, Standard Factor of Overhead Costs, Goal Setting, Innovation

Kulikova Tatyana Andreevna, Kirikutsa Elena Gennadievna, Sinyavin Vladimir Yurievich, Bareeva Irkyam Adgamovna. (2023). A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs. Economics, 12(3), 93-104.

Copyright © 2023 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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