Case Study - Overhead Costs Analysis

Construction projects become complicated and fragmented so that many specialty contractors are involved. In such changed environments, a general contractor’s overhead costs are increasing comparable to direct costs. In addition to an increase of volume, activities consisting of overhead costs play an important role in coordinating different participants who include different specialty contractors and client. This paper reviews traditional overhead control and critiques problems thereof through literature review, interviews with professionals, and data collection. It proposes a new overhead cost control method, called profit-point analysis (PPA) applying activitybased costing (ABC). It is followed by a case study presented to exemplify the new method.