There are many costs in a company, some costs cannot be directly attributed to the products or services. However, these costs must be taken into account when determining the price of the products; they must be included in the price calculation . Such costs are called imputed costs.
Definition of imputed costs
Imputed costs are not or not fully included in the financial accounting, but they are often necessary to map the actual consumption of the production factors used for the operational provision of services. Imputed costs may not be taken into account in financial accounting, but they are necessary for costing so that the products can be calculated correctly. Since the imputed costs are not based on any invoices or contracts, these costs must be taken into account. With the imputed costs, the accuracy of the cost accounting is specified.
Importance of the imputed costs
According to Gradinmath, imputed costs must be offset in the cost accounting so that the actual consumption can be determined independently of accounting policy measures and commercial and tax regulations. With the imputed costs, correct prices can be calculated, the remuneration of entrepreneurial risks is possible. Costs and effort are objectively delimited with the imputed costs.
Types of Imputed Costs
A distinction is made between different types of imputed costs:
- Imputed interest
This is interest for the capital used in the entire service process, which also includes equity. In the simplified method, interest can only be paid on the equity capital used; the imputed equity interest can be included in cost accounting as additional costs with the interest on borrowed capital taken from accounting. The market interest rate should form the basis for the imputed interest rate.
- Imputed entrepreneur’s wages
In contrast to the managing directors of corporations, the managing partners of partnerships do not receive a salary, they are only paid a share of the profit. If no entrepreneur’s wages were charged for the work performed by the partner, the cost costs would be determined too low. For the shareholders, an imputed entrepreneur’s wage is therefore fictitiously set as additional costs. The usual salary of a manager in a comparable position, industry and company size is used as a benchmark for the imputed entrepreneur’s wages.
- Imputed rent
If a company owns the premises or if its own premises are used for business purposes, no rental costs are paid to a third-party landlord. There is no rent because the owner does not pay rent to himself. In order to make the cost calculation realistic, an imputed rent must be applied. The local rent for comparable rooms serves as the basis.
- Imputed depreciation
Imputed depreciation must be made in cost accounting so that the actual depreciation of fixed assets and production factors is recorded. Vehicles, computers or machines serve as production factors. The imputed depreciation is a different cost, which is usually higher than the commercial depreciation in the balance sheet. The calculation of the imputed depreciation is based on the replacement costs in the respective accounting period. A substantial capital maintenance should be possible with the measurement.
- Imputed risks In cost accounting, imputed risk costs are recorded; they serve to hedge against individual risks in the company. Imputed individual risks relate to individual cost centers, operational services, functions or areas. Such risks can be accidents, thefts, explosions, fire hazards, shrinkage, price erosion, deterioration of goods, additional costs due to material or work errors or repair work. If these risks are not covered by insurance, imputed risk costs are applied. The general entrepreneurial risk is not one of the calculatory risks.
Additional costs and other costs
Imputed costs are differentiated as additional costs and other costs. The additional costs are costs for which there is no expense. Examples of additional costs are imputed rent, imputed interest for equity and imputed entrepreneurial wages. In the case of other costs, there is a different amount of effort. Examples of other costs are imputed risks, imputed interest not only for equity or imputed depreciation, such as those made for computers, machines or vehicles.