Question

Give five examples of manufacturing overhead costs. Why are they consideredindirect costs?

Short answer

Plant utilities, depreciation on manufacturing plant and equipments, plant insurance, plant property taxes and rent on manufacturing plant are the five examples of the manufacturing overhead costs. It is considered as the indirect cost because it’s hard to trace this expense for each product.

Step-by-step solution

Indirect cost

Indirect cost means the cost which are not directly identified for a single product manufactured by an organization. It is the cost which is incurred for multiple activities.

Manufacturing overhead cost

Manufacturing overhead is the aggregate of all the indirect cost which is incurred by an organization while manufacturing the products. It includes repairing of machines, depreciation on machinery, machinery insurance, etc. It is considered as an indirect expense because it can’t be expressed on per unit basis.