Cover Image
close this bookFinancial Management of a Small Handicraft Business (Oxfam, 1988, 43 p.)
View the documentAcknowledgements
View the documentIntroduction
close this folderI. Cost calculations in the handicraft industry
View the document(introduction...)
View the documentI. 1. Production costs
View the documentI.2. Overhead apportionment
View the documentI.3. Selling and distribution costs
View the documentI.4. Ways to reduce costs
close this folderII. Pricing
View the document(introduction...)
View the documentII. 1. Value in the market
View the documentII.2. Costs and pricing
View the documentII.3. Contribution analysis
close this folderIII. The concept of working capital
View the documentIII.1. Defining working capital
View the documentIII.2. The role of working capital
View the documentIII.3. Performance measurement
View the documentIII.4. Profits
close this folderIV. Financial planning and decision making
View the documentIV. 1. Management Accounting
View the documentIV.2. Planning for working capital requirements
View the documentIV.3. Releasing cash from other assets
View the documentIV.4. Working capital decisions
View the documentConclusion
View the documentA manual of credit & savings for the poor of developing countries

I.3. Selling and distribution costs

Income-generation occurs only when there is sales revenue, a consideration obvious enough, but nevertheless often overlooked by agencies which fund production units without undertaking a market feasibility study. In order to achieve sales, costs will be incurred. These will depend on what the selling method is. There may be promotional leaflets or catalogues, travel expenses to visit customers or sell in the marketplace, a commission payable to a sales agent etc. When selling overseas, there will certainly be further costs: cartage to port, additional packaging, documentation, customs clearance perhaps levies, certainly extra running around.

Selling and distribution costs are part of the overheads of a production unit. They may be variable, for example, a sales commission, or fixed, such as the bus fare to the weekly bazaar. The important thing to remember is to calculate them and include them in the coatings analysis in the same way as other overheads. Very often small businesses overlook them, because they have not evolved a selling strategy, and then find they cannot afford to incur the expenditure necessary for marketing. The onus to sell products is on the production unit; it should not wait for people to visit, but rather go out and find the customers, confident that there is some margin in the costing for doing so.

At this stage the costing sheet might be looking like this (Figure 3):

Figure 3. Fibre Mat Costing Sheet (Direct & Indirect Costs)

Direct costs

Money unit

As per Figure. 1


Variable overheads

Employment of porters and casual labour


Fixed overheads

Apportionment as per Figure 2


Distribution and selling costs

Apportionment of transport costs


Total cost