Manufacturing Overhead Examples

What is the first thing, you want to find something interesting in accounting? Yes, examples are the most interesting way to understand accounting. So, I try to give more and more examples for making accounting interesting. Today, I am explaining some important manufacturing overheads examples and its accounting treatment.

1. Canteen Expenses

For employees welfare a canteen is operated by owner of company. Owner provides the canteen facilities at very subsidized rates. So, this is overhead and we give it standing order no.

2. Stores Overhead

In store overhead, we include rent of store, salary of store staff, insurance etc.

3. Compensation payment to workers

If any compensation is given to workers on his retirement, it will be overhead. We also calculate the compensation payment to workers in case accident which happened in factories. All these compensation will be included in manufacturing overheads.

4. Dearness Allowance

Dearness allowance is given for facing inflation in consumable products. It helps to maintain standard of living in society. Suppose, an employee who is working in a factory has no room for living, then, we give house rent allowance to him. So it will be overhead and calculated on the basis of basic salary.

5. Defective Work

Sometime due to ignorance or machine problem, defective work happens and it is loss of business and includes in manufacturing overhead. If it is abnormal, it will be transferred to costing profit and loss account.

6. Drawing Office and Design Cost

All drawing office and design cost are collected in service cost center and it is calculated and distributed on the basis of design no., labor hour rates. If these designs are made for selling tender, then it will be part of sale overheads.

7. Erection and Dismantling of Plant and Machinery

Erection and dismantling cost are charged for removing machines. All these are manufacturing overheads.

8. Fines Realised from Workers

All fines which are realised from workers are not the income of company. All these incomes will transfer to a special reserve account and will use for welfare of workers.

9. Fire Prevention Costs

Fire prevention costs include the cost of training and cost of workers of such service cost center.

10. Fringe Benefits to Employees

In fringe benefits to employees, we include leave encashment, owner’s contribution in provident fund and other pension schemes, medical fringes etc.

11. Inspection Cost

Inspection cost is paid for quality control of product. This inspection can be done any part of production for identify the defective work.

12. Insurance

Company pays insurance of employees for reducing his payment risk at the time of accident in factory. All these premiums are also manufacturing overheads.

13. Lighting, Heating, Aircontioning, Ventilation Expenses

Lighting, heating, aircontioning and ventilation expenses are distributed on the basis of wattage, floor area, and cubic capacity. If there is separate meter in different department, then no problem of distribution of these manufacturing expenses.

14. Materials Reconditioning Expenses during storage

All these are also manufacturing overheads, if these are related to indirect materials.

15. Power Costs

We include electricity, gas, pressure air and water in power costs and it is manufacturing cost if these are used in factory. These are distributed in different department on the basis of capacity, horse power, watt, machine hour rate etc.

16. Incentive Bonus

It is part of labor cost and this is given to laborers for increasing their efficiency

Accounting treatment of incentive bonus overhead

Incentive bonus to direct laborers will be the part of direct labor cost and adds in it.

Incentive bonus to indirect laborers will be the part of overhead and charged on related department.

17. Bonus Paid Under Payment of Bonus Act

Under payment of bonus act, company is responsible to pay bonus out of profit.

Accounting treatment in cost accounts

Minimum amount of bonus is part of wages and more amount of bonus will be charged on costing profit and loss account.

18. Maintenance and Repairs

Maintenance and repairs are very important need of any manufacturing organization. After using machine and plants at large scale, its importance has increased. Main aim of maintenance and repairs are following:

a) To reduce the loss of wastage due to not working machines and equipments effective way.

b) To reduce the delay time of production.

Accounting treatment of Maintenance and repairs

Department of maintenance can be divided into two parts, one is preventive maintenance and other is corrective maintenance. Standing order numbers are given to each cost center or department. For every department, employees are appointed who are responsible for maintenance and repairs and overhead cost is calculated of these works. We also open repair and maintenance reserve account in which we credit a certain amount and when we spend the amount on maintenance and repair, we debited same amount in this account and balance of this account will be capital and used for future maintenance and repair charges.






access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar Control Your Spending corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Finance Journal Entries Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents Partnership pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching Wealth wikipedia working capital youtube
Accounting Education: Manufacturing Overhead Examples
Manufacturing Overhead Examples
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock