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It is also known as manufacturing overhead or works overhead. It can be inferred as the total amount of all the costs that is involved in the operation of all the production facilities of a manufacturing business unit. All sorts of costs are included in the factory overhead costs except the raw materials and direct labor. Quality assurance costs, cleanup costs and property insurance premiums are also included in the factory overhead costs. Its application can be mainly found in indirect labour and indirect cost. Students looking for various topics regarding Factory overhead costs shall refer Factory Overhead Costs Assignment Help.
Steps To Determine Factory Overhead Costs Budget
The different steps involved in determining Factory Overhead Costs is explained in Factory Overhead Costs Assignment Help, they are
• Identifying the factory overhead costs: Factory overhead costs include all the indirect expenses that are incurred during the process of manufacturing. The materials and the direct labor costs are not included in these. Moreover, they are generally found on and off the production floor. The wages paid to product inspectors, quality inspectors, quality and maintenance personnel can also be referred as factory overhead costs.
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• Total cost estimation: In general the budget from the prior year can be used as the starting point for the budget of the current year unless there has not been any drastic change in the production. The figures of the budget are changed according to the change in the prices of the previous year’s budget. When a budget is being put together an estimation the size of the production along with the indirect costs is also carried out.
• Factory overhead cost per unit: We can determine the factory overhead cost per unit by dividing the total costs by the no of units that has been sold or produced. By doing this we can ensure that all the overhead expenses are shared equally among all the units. The total costs have to be divided by the estimated production amount to find out the factory overhead cost per unit. It is explained in Factory Overhead Costs Assignment Help.
• Adjusting the selling price: By the determination of the factory overhead cost per unit, we can check whether we need to adjust the selling price or not. We shall add the direct material costs, direct labor costs and factory overhead costs and then we have to divide that by the total no of units produced. We can bring about a change in the profit margin by adjusting the selling price and decreasing the production costs. The various techniques can be understood and materials can be provided by Factory Overhead Costs Assignment Help.
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