Film Accounting Glossary
Indirect cost
What is an indirect cost?
Also called shared cost, or overhead cost.
An indirect cost is a cost that benefits more than one department, episode, or production and therefore has to be allocated rather than charged directly.
Production office rent, general insurance, shared security, and a hauler moving vehicles for two units are all indirect. Because allocation is a judgment, indirect costs draw the most scrutiny from incentive and studio auditors, and each one needs a written, consistent basis.
Example
The production office rent, the general liability premium, and a hauler moving vehicles for both units all benefit more than one account. Each needs a written basis, shooting days or vehicle counts, applied consistently every week.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Journal entries with the allocation basis documented in the audit file. The area incentive and studio auditors probe hardest.
Common mistake
Allocating indirect cost differently each week depending on who asks. Inconsistency is what turns a defensible allocation into a disallowance.
Related questions
- What is an indirect cost on a film?
- A cost benefiting more than one department, episode, or unit: production office rent, general insurance, shared security, or a hauler serving two units.
- How are indirect costs allocated?
- On a written basis reflecting use, such as shooting days or vehicle counts, applied consistently and kept in the audit file with the supporting workings.