Manufacturing Overheads Examples

A company which is operating a factory has to pay many expenses while raw material and direct labor are classified as direct expenses because they are directly related to production of goods however there are many expenses which cannot be directly attributed to production of goods and they are classified as manufacturing overheads or manufacturing expenses. Let’s look at some of the examples of manufacturing overheads –

  1. Salary of store manager, supervisors, sweepers, security man salary etc…will be included in manufacturing overhead because these people are not directly associated with production of goods.
  2. If company has taken factory on rent then rent of factory will also be included in manufacturing overheads.
  3. Employee’s expenses like company’s contribution to provident fund, gratuity, insurance amount paid for employees and claims arising out of accidents in factory.
  4. General insurance expenses paid for insurance of factory from earthquake, fire, floods and other such calamities.
  5. Utility expenses like telephone bill, internet usage expense, electricity expenses, water bills, parking lot expenses for parking of employees vehicles, water filter expenses and so on.
  6. Depreciation on various assets which are not directly associated with production of goods like depreciation on car, depreciation on factory building, depreciation on computers etc……
  7. Day to day expenses related to repairs and maintenance of machinery in factory.

As one can see from the above that classifying manufacturing overhead is not that easy because same set of expenses can be direct for one factory and indirect or manufacturing expense for other and that is the reason why before classifying any expense as manufacturing overhead one should look the nature of work and industry in which company is operating.

0 comments… add one

Leave a Comment

Related pages

gold bullion standard definitionexample of unqualified audit reportsources of long term finance advantages and disadvantageswhat is oligopoly marketnon cumulative preference sharesexamples of inelasticduality concept of accountingexamples of assetslaw of diminishing utilitycapitalist economy advantagesskim pricing strategyexample of monopolistic competition companyassumptions of capmdiff between cash flow and fund flowdisadvantage of barteringexamples of skimming pricingneft long formcharacteristics of monopolistic competition marketcapital withdrawal journal entrydurable consumer goods definitionadvantages and disadvantages of population in indiadebenture sharesunsystamatic riskreal nominal personal accounts rulespenetration pricing examples productshorizontal analysis of a balance sheetexplain privatisationcapital account convertibility indiaadvantages and disadvantages of breakeven analysischaracteristics of mixed economywhat are the strengths and weaknesses of capitalismstrengths and weaknesses of mixed economyexample of explicit costfreight inwardsdefine certificate of depositsoperating profit ratio analysisadvantages of conglomeratepurchase bill discountingcommand economy advantages and disadvantagesadvantages and disadvantages of oligopolydirect expenses and indirect expenses in accountingcash credit and overdraftdebit card advantagesvertical merger exampleexamples of substitute goods and complementary goodsdiscounting of bills meaningdefine unitary elasticmonopolistic marketcharacteristics of a planned economywhat is a trade discount in accountingcharacteristics of a planned economyconsumer nondurable goodswhat is a major reason for conglomerate mergersthe disadvantages of globalizationadvantages and disadvantages of publicity in marketingwhat is substitution effectbill discounting without recourseadvantages of demographic segmentationconglomerate merger meaningexamples of monopolistic competition productsexample of horizontal mergerauthorized shares vs outstanding sharesdisadvantage of globalizationpayback method of investment appraisalcharacteristics of a autocratic leaderwhat is autocratic leaderdistinguish between joint venture and partnershipleadership autocraticconglomerate companies exampleswhat is the difference between accounts payable and accounts receivabledepreciation declining balance methodbarter trade meaningcharacteristics of a autocratic leaderdisadvantages of developing countrieswhat is a horizontal monopolytypes of accounts personal real nominalbearer cheque and order cheque