Above-The-Line Costs Definition

cost line

You should frequent film festivals, industry seminars, and workshops for opportunities to network. Resourcefulness, diplomacy, and efficient decision-making skills are invaluable for a line producer. You must be comfortable moderating compromises between members of the crew and be able to stand behind your choices. You will be working in a highly collaborative environment, but are also a leader and at the end of the day are responsible for the cost of a project.

However, operating income does not include items such as other income, non-operating income, and non-operating expenses. The Line Producer is one of the first people to be employed on a film’s production by the producer and executive producers. Alternatively, or in addition, they may manage the day to day physical aspects of the film production, serving a role similar to the unit production manager. Line Producers usually do not act as part of the creative team for a picture. Because Line Producers work on location, they don’t work on more than one film at a time (unlike other producer roles).

The COGS are the expenses incurred in the normal operations of the business to generate the revenues. They may include the cost of raw materials, wages of workers in the manufacturing line, and other direct manufacturing overheads. The items below the gross profit line are then below the line items that include operating expenses such as facilities rent, salaries, and utilities. A different interpretation of the concept is that “above the line” refers to the gross marginearned by a business.

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Line Producers must possess an in-depth knowledge of scheduling and budgeting, and of all the physical and technical processes of filmmaking. They need excellent industry contacts, and must command the respect of the production crew. Exceptional communication skills are required, as well as the diplomacy to balance the creative expectations of the director, artists and creative personnel with the financial resources available.

Above-the-line costs are those above the gross profit line, while below-the-line costs include costs below gross profit, namely operating expenses. Operating income–also called income from operations–takes a company’s gross income, which is equivalent to total revenue minus COGS, and subtracts all operating expenses. A business’s operating expenses are costs incurred from normal operating activities and include items such as office supplies and utilities. Once the costs are determined, the line producer is the person who is in charge of hiring all of the below-the-line production crew such as camera crews, lighting crews, and catering staff.

cost line

Line Producers are in charge of all the business aspects of the physical production of films. Line Producers are usually recruited onto the production team during the later stages of development. From this schedule the Line Producer can accurately estimate the cost of each day’s shooting, and produce a provisional budget estimating the total amount of funding required. Once the producer and executive producers have raised the required finance, the film can go into pre-production. Above-the-line costs are a company’s cost of goods sold, also called cost of revenue or cost of sales.

They always need to plan for the worst, while simultaneously being able to inspire others to excel in their work. Unlike producers, Line Producers are not responsible under health and safety legislation for setting up health and safety procedures; however, they are required to carry out risk assessments according to regulatory requirements. They must therefore know how to identify the hazards in the production environment, to assess the level of risk, to recommend action, and to carry out a review of their assessment.

This person is a troubleshooter on set and has the authority to make decisions that will affect the schedule or budget. Above-the-line costs are often referred to as the cost of goods sold (COGS), while below-the-line is operating and interest expenses and taxes. It’s important to note that operating income is different than net income as well as gross profit. Operating income includes more expense line items than gross profit, which primarily includes the costs of production. Operating income includes both COGS or cost of sales as well as operating expenses (highlighted in red above).

Under this interpretation, revenues and the cost of goods sold are considered to be above the line, while all other expenses (including operating expenses,interestand taxes) are considered to be below the line. The line producer is most often an industry veteran who has worked in a variety of positions, gaining a well-rounded knowledge of production. This is a freelance role, so there may be long periods of inactivity between gigs.

cost line meaning, cost line definition

What are above the line costs?

In economics an isocost line shows all combinations of inputs which cost the same total amount. Although similar to the budget constraint in consumer theory, the use of the isocost line pertains to cost-minimization in production, as opposed to utility-maximization.

Inventory that is sold appears in the income statement under the COGS account. The beginning inventory for the year is the inventory left over from the previous year—that is, the merchandise that was not sold in the previous year. Any additional productions or purchases made by a manufacturing or retail company are added to the beginning inventory. At the end of the year, the products that were not sold are subtracted from the sum of beginning inventory and additional purchases. The final number derived from the calculation is the cost of goods sold for the year.

  • Line Producers are in charge of all the business aspects of the physical production of films.

Analyzing operating income is helpful to investors since it doesn’t include taxes and other one-off items that might skew profit or net income. A company that’s generating an increasing amount of operating income is seen as favorable because it means that the company’s management is generating more revenue while controlling expenses, productions costs, and overhead.

Operating income is an accounting figure that measures the amount of profit realized from a business’s operations, after deducting operating expenses such as wages, depreciation, and cost of goods sold (COGS). “Below-the-line” is a term derived from the top sheet of a film budget for motion pictures, television programs, industrial films, independent films, student films and documentaries as well as commercials. The “line” in “below-the-line” refers to the separation of production costs between script and story writers, producers, directors, actors, and casting (“above the-line”) and the rest of the crew, or production team.

They must expect to work long hours, though the role can be financially very rewarding. Where a Line Producer has a creative input to the production, he or she is often credited as a coproducer. Above the Line and Below the Line is used by the company to manage the resources available in a company to deliver a surplus result.

For manufacturers, above-the-line costs are just another way of saying costs before operating expenses. Simply, they are COGS or the equivalent account that is subtracted from sales to arrive at gross profit. After gross profit on the income statement, there is a line, followed by itemized operating expenses. Above-the-line costs are the costs incurred by the business to make the product it sells or to provide its service. Above-the-line costs are determined differently for manufacturing and service businesses.

Knowing the cost of goods sold helps analysts, investors, and managers estimate the company’s bottom line. While this movement is beneficial for income tax purposes, the business will have less profit for its shareholders. Businesses thus try to keep their COGS low so that net profits will be higher.

For manufacturing-type businesses, above the line costs are any costs deducted to arrive at gross profit, namely cost of goods sold (COGS). Above-the-line costs refer to either costs above the gross profit line or the costs above the operating income line, depending on the type of company. COGS is not addressed in any detail ingenerally accepted accounting principles(GAAP), but COGS is defined as only the cost of inventory items sold during a given period.

Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.

They are in charge of overseeing the production budget and the day-to-day operations. They work closely with the executive producer of a television show or the director of a film to make sure they are properly executing on the creative vision. Line producers are also in charge of coordinating all post-production efforts such as editing and special effects.

The line producer is brought on during pre-production and first must dissect the script to estimate costs based on personnel, locations, equipment, and all other requirements of the project. He or she will work closely with the director, production manager, and other department heads to create a budget and shooting schedule. The line producer will participate in below-the-line decisions like hiring crew and renting gear based on the budget he or she has established and that has been approved by the producers. During filming, the line producer will act as the eyes and ears of the producer to ensure the production runs on schedule and on budget.

Example of Above-the-Line Costs

A Line Producer may also hire key members of the crew, negotiate deals with vendors, and is considered the head of production. Line Producers are rarely involved in the development of the project, but often play a crucial role in costing the production in order to provide investors with the confidence to invest in the project. As soon as the finance has been raised, the Line Producer supervises the preparation of the film’s budget, and the day to day planning and running of the production.

Not only do service companies have no goods to sell, but purely service companies also do not have inventories. If COGS is not listed on the income statement, no deduction can be applied for those costs. For example, the COGS for an automaker would include the material costs for the parts that go into making the car plus the labor costs used to put the car together. The cost of sending the cars to dealerships and the cost of the labor used to sell the car would be excluded. Because COGS is a cost of doing business, it is recorded as a business expense on the income statements.

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