The term “Overhead Costs” is often used to include all costs not within the authority of individual functional managers. In fact, cost from other functional areas or organizational units include shared services needed by and used by the functional managers. These include support for IT systems; the HR services; costs of managers and staff at various levels in the organization; as well as the general overhead of keeping the doors open and lights on for the entire organization.

Within your ABC model it is important that shared services and overhead sub-processes are not hidden in the model, but are kept separate and visible. In fact the services them selves can be explicitly defined in CostPerform and allocated to the internal customers based on expected or actual volumes and the corresponding cost.

Shared services are then traced to processes by cause and effect relationship. True overhead is different from a shared service in that it has no cause that can be traced to individual direct processes. Overhead is allocated by management’s method of choice. Examples of true overhead are the costs of the CEO or Director and staff for a Department.

These direct and overhead components of processes and output costs are readily visible in COSTPERFORM reports at the fully allocated or fully costed level.