Information on exact costs of overhead

[Your Name]
[Your Title]
Williams Company
[Company Address]
[City, State, ZIP Code]
[Email Address]
[Phone Number]
[Date]

Nancy Kopay
123 Cedar Lane
Altoona, KS 66651

Dear Ms. Kopay,

Thank you for your recent letter and for your kind words regarding our detailed job cost sheets. We genuinely appreciate your business and your feedback is invaluable to us as we strive to serve our customers better.

I understand your curiosity about the estimated overhead costs included in your job. It’s an important question that many of our clients have as well. Allow me to explain why we use a predetermined overhead application rate rather than providing exact costs for overhead associated with specific jobs.

In our industry, overhead costs—such as utilities, rent, equipment depreciation, and administrative expenses—are incurred across multiple projects and are not directly traceable to any single job. Because of this, it would be impractical and time-consuming to allocate these costs precisely for each individual project. Instead, we calculate a predetermined overhead rate based on anticipated total overhead costs and expected activity levels (such as labor hours or machine hours) at the beginning of each fiscal period.

This method allows us to apply a consistent and fair rate of overhead across all jobs. By estimating the overhead in this manner, we can provide you with a more streamlined and comprehensible overview of your project’s costs while ensuring that each job shares an equitable proportion of the total overhead expenses.

That said, I completely understand your interest in knowing the specific components of overhead costs. While we do not track exact overhead costs for each job, I can provide you with a general breakdown of what typically comprises our overhead expenses. This includes areas like:

– Administrative Salaries: Wages for management and office staff.
– Utilities: Expenses related to electricity, water, heating, etc.
– Depreciation: The gradual reduction in value of our tools and equipment.
– Rent: Costs associated with leasing our workshop and office space.
– Insurance: Coverage for liability and property.

If you have any further questions or would like to discuss this in more detail, please feel free to reach out to me directly. We value your insights and are always looking for ways to improve our communication with our customers.

Thank you again for your understanding and support. We look forward to working with you on your future carpentry projects.

Warm regards,

[Your Name]
[Your Title]
Williams Company