Introduction to this document

Imputed cost calculator

As the company’s accountant, how do you make sure that decisions made by the board have taken all costs into account, even where these may not be obvious to them?

Hidden costs

Costs may not be incurred directly but are still borne, e.g. your company may own its premises and not pay rent but is losing out on letting income. So you’ll need to make sure you include imputed costs in your profit analysis for the board. Use our Imputed Cost Calculator to help you decide on just how much to bring in.

Rent. Many businesses own their premises and so whilst there are maintenance costs and rates, there is no rent paid. So where the board is deciding on the viability of a particular business or department, it should be taking into account imputed rental costs where owned premises are used.

Check on rental values in your area for comparable premises being put to similar uses as your property, and use these to calculate the imputed cost.

Time. In many owner-managed businesses the owners will not be drawing a market salary even though acting as, perhaps, the marketing or production director. When calculating the profitability of the business or, for example, the production department, include going-rate salaries for the relevant directors as imputed costs.

Money. Where internal funds are used to finance the purchase of an asset or to fund working capital, interest costs can also be imputed. For example, the sales teams for north and south can be charged imputed interest on overdue customer accounts so that departmental profits can be analysed.