11.6 Within legally incorporated enterprises, enterprises within the enterprise have common costs.

1. Let us consider again an excerpt from the nesting painting:

		A	B	C
		Child 1	Child 2	Parent
2	Turnover	500	400	900
3	Direct costs	300	240	{540
4	Direct margin	200	160	{360
	8	Common costs	340
	9	Direct margin (C4 – C8)	20

When, in such a table, the parent enterprise is legal-entity enterprise then over the period considered:

in line 9, the direct margin is the profit or loss of that business;
the total expenses of this enterprise – in other words, costs, including depreciation of fixed assets – are equal to the sum of the amounts in cells C3 and C8;
This sum is the direct costs of the contractor, including all its organizational divisions, including internal workshop(s) if applicable (previous proposal).

2. Costs common to sister margin-producing sections are direct cost components of the sisters' parent.

The full wages of the management of a (parent) margin producing department by several departments (children) are:

the costs common to children that the rays constitute;
of the direct costs of the parent that this department constitutes.

Costs that are common at one level become direct at a more aggregated level. Conversely, costs that are direct at one level become common at a less aggregated level.

3. Overhead costs are common.

This is particularly clear when the copy of the painting in question is the one in which the parent is the contractual undertaking. Consider the case of an enterprise such as:

The administrative costs upstream of the general management are part of the common costs: general meetings, boards of directors (including directors' fees), statutory auditors.
The costs of the Directorate-General and the possible General Secretariat are part of the common costs.
The costs of the top or the entire sales department, as well as institutional advertising and public relations budgets, are part of the common costs.
The common costs also include personnel costs and depreciation of equipment for the administrative and financial directorate, the human resources directorate and the information systems directorate (IT).

4. In forecasting management and unit cost calculations, common costs raise the problem of their distribution.

All along a chain of nested tables, from the one where the parent is the contract enterprise to one where the children are products sold by the contract enterprise, common costs are to be distributed in a cascade. At the end of the chain where the parent enterprise is the contract enterprise, the latter's profit, i.e. its direct margin, is to be divided with the common costs. In the end, these successive allocations can amount to more than 80 or 90 % of the selling prices excluding VAT of part or even the entire range, with a significant effect on competitiveness for the reasons that we will examine in the rest of this chapter.