Project Management Department

by Robanix. Posted on Sep 16, 2020    4    9


Which department does PM come under?


Comments

LavenderAutist 1

Why are you asking the question?

That may be a more useful exercise.

  Robanix 1

Trying to figure out how to allocated PM costs to the final product. I'm thinking it's a support department, but sounds like it's not a free standing department.

LavenderAutist 2

It's pretty simple. PM costs are overhead. It's a cost to develop something. It isn't in gross margin.

It sounds like you are conflating organization charts with management accounting.

https://www.pmi.org/learning/library/cost-allocation-multiproject-matrix-environment-10332

https://www.cpapracticeadvisor.com/small-business/news/12368875/what-is-overhead-allocation-why-your-jobs-should-take-on-additional-costs

  Robanix 2

You are correct, that's exactly what I'm trying to reconcile.

Confused.

Overhead is all indirect manufacturing/production costs. No? This is based on a textbook.

After reading about matrix strcuctures, PM is the horizontal dimension that cuts across various functional areas, some of which are part of manufacturing/production and some aren't. In my case, my PM doesn't touch anything related to production/manufacturing. So it seems that it can't be overhead and would fit under SG&A.

LavenderAutist 1

Exactly. It seems like you got it.

I love it when. Someone on Reddit that asks for information does research and tries to figure it out themselves.

I think you're on the right track... assuming I understand your situation without being there. I think of SG&A as an overhead expense, but you can also have operational overhead as well.

You might think about it this way. Say you own a restaurant chain. You have stores that that service customers and then you might have a headquarters that supports all of your stores. The overhead in the restaurant is generally all of the stuff that you have to pay regardless of whether a customer comes in or not. The overhead at your headquarters may be your accountants, marketing people, supply chain, finance, procurement, IT, etc.

If you like, you can allocate overhead to your product costs as it relates to management accounting. Or you can keep it sperate. If you were going to allocate those overhead costs, you could easily tie the overhead of specific locations to the products they sell. The average costs and margins would be specific to those locations, but also could be averaged across locations to figure out your profitability that way as well. You could also theoretically allocate some corporate overhead as well, but it doesn't feel as much of a useful exercise as it would be at the restaurant level.

I hope that helps.

I'm not an expert in management accounting so you might want to ask someone who understands management accounting or operational accounting in a production or manufacturing environment if you feel you need to do something very detailed with precision.

  Robanix 1

Thanks, I think at least I'm facing the dartboard now. Still hazy on a few things. Don't see the full picture quite yet.

FirstShotHan 2

You can have a pm in pretty much any department

  Robanix 1

Thanks, food for thought.

ladeedah1988 3

In our company - marketing.