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Distribution overhead

Distribution overhead is indirect cost of moving finished output to customers and maintaining the related delivery function. It can include warehouse handling, delivery supervision or fleet running costs. Distinguish it from inbound transport needed to obtain materials and from production work. Cost behaviour depends on the arrangement: a fleet lease may be fixed while fuel or outsourced delivery charges vary. Normally it is a non-production cost in production-cost statements.

Worked example

A business pays a fixed $2,000 monthly vehicle lease plus $1 per delivery. For 500 deliveries, distribution cost is $2,500 on these assumptions.

Common mistake

Do not assume all transport costs belong to the same category: inbound material freight and customer delivery serve different functions.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027