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Factory overhead, also called manufacturing overhead, manufacturing overhead costs (MOH cost), work overhead, or factory burden in American English, is the total cost involved in operating all production facilities of a manufacturing business that cannot be traced directly to a product. [1] It generally applies to indirect labor and indirect cost.
In business, an overhead or overhead expense is an ongoing expense of operating a business. Overheads are the expenditure which cannot be conveniently traced to or identified with any particular revenue unit, unlike operating expenses such as raw material and labor.
Various techniques used by cost accountants include standard costing and variance analysis, marginal costing and cost volume profit analysis, budgetary control, uniform costing, inter firm comparison, etc. Evaluation of cost accounting is mainly due to the limitations of financial accounting.
Following strong initial uptake, ABC lost ground in the 1990s compared to alternative metrics, such as Kaplan's balanced scorecard and economic value added.An independent 2008 report concluded that manually driven ABC was an inefficient use of resources: it was expensive and difficult to implement for small gains, and a poor value, and that alternative methods should be used. [4]
A pre-determined overhead rate is normally the term when using a single, plant-wide base to calculate and apply overhead. Overhead is then applied by multiplying the pre-determined overhead rate by the actual driver units. Any difference between applied overhead and the amount of overhead actually incurred is called over- or under-applied overhead.
Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. The manufacturing cost is classified into three categories: direct materials cost, direct labor cost and manufacturing overhead. [1] It is a factor in total delivery cost. [2]
Job costing (known by some as job order costing) is fundamental to managerial accounting. It differs from Process costing in that the flow of costs is tracked by job or batch instead of by process. job cost is done for one single product The distinction between job costing and process costing hinges on the nature of the product and, therefore, on the type of production process:
In practice, this equivalence does not always hold, and depending on the period under consideration by management, some overhead expenses (e.g., sales, general and administrative expenses) can be adjusted by management, and the specific allocation of each expense to each category will be decided under cost accounting. In recent years, fixed ...