Typically, Direct Expenses are shown as a monetary value and in order for you to capture meaningful trend analysis you will need to express them as a percentage of departmental Turnover.
Keeping control of Direct Expenses can be a difficult task unless you fully understand the difference between Varaible Expenses and Semi-Fixed Expenses.
Example:
A) Variable Expenses = R133,778 B) Semi-Fixed Expenses = R280,326 C) Direct Expenses = R414,104 (A + B) D) Department Turnover = R7,432,165 E) Vehicles Sold = 784 F) Total Expenses p/unit = R526 (C ÷ E) G) Direct Expense % = 3.7% (C ÷ D X 100)
Discussion:
Variable Expenses are directly linked to sales volume and Semi-Fixed Expenses are not linked to sales volume therefore the actions that you need to take to maintain control is different in each area.
Related Terminology:
The
Direct Expenses of the Sales Department are also known as Departmental
expenses and refer to the total expenses incurred. They represent the
sum total of the Variable Expenses and Semi-Fixed Expenses.