Question

Distinguish between (a) factory overhead and (b) selling and administrative overhead.

Short answer

Only indirect expenses incurredduring production constitute factory overheadwhile selling and office overhead expenses have little bearing on the production process.

Step-by-step solution

Meaning of Manufacturing Overhead

Manufacturing overhead costs refer to the total of all the indirect costs that are not directly related to the production process.

Difference between a) factory overhead and (b) selling and administrative overhead

a. Manufacturing overhead is another name for factory overhead.

1) Indirect materials, Indirect labor, and Indirect expenses make up factory overhead.

The expense incurred in producing items is known as manufacturing overhead.

Expenses such as factory rent, consumables, depreciation, repairs, and upkeep are examples of factory overheads.

b. Selling and administrative overhead: Selling and administrative overhead are unrelated to output.

These expenses have no direct connection to the production of commodities.

Office rent, administrative staff pay, advertising, etc., are some instances of selling and administrative overhead.