PEP Review 89-2-4
Nonmanufacturing Overhead Spending in the Chemicals Industry
Published: August 1990
Historical data on nonmanufacturing (corporate) overhead costs for the U.S. chemical industry have been analyzed along with more recent data for eight U.S. chemical companies, four primarily in commodity chemicals and four in specialties.
The historical data indicate that R&D costs, as measured by employment and funding, have generally been exempt from overhead cost reduction pressures.
Overhead spending for the eight companies averaged 20% of revenues, allocated 5% to R&D and 15% to selling and administrative (S&A) costs. The specialty chemical companies spent more on S&A than did the commodity chemical producers. No strong decrease in overhead spending for these eight companies was apparent.
Data for Japanese and European companies show that European companies spend slightly more on both R&D and S&A than do U.S. and Japanese companies. The Japanese spend considerably less on S&A.
The overhead cost allocations used in PEP economics are judged to be reasonable.