Non-Manufacturing Overhead Calculation Examples, Concepts, Illustrations, Sample Help Online

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Understanding the concept of Non-Manufacturing Overhead Calculation

Product cost includes direct material, direct labor and manufacturing overhead. Non-Manufacturing Overhead is the expense outside the factory. The term Non-Manufacturing Overhead is used to mean the marketing and selling expenses, general administrative expenses and other expenses like interest on loans. These costs are not product costs as they are not assigned to the cost of goods sold but they are necessary to carry on general business operations but are not part of the physical manufacturing process. These costs are represented during a period of time and are not calculated into the cost of goods sold. Selling costs include all those expenses incurred to sell the product to the customer.The administrative expenses include all executive and costs related with general management of an organization.

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Non-Manufacturing Overhead Calculation Examples explanation

Let’s understand the concept better with help of an example.

Example: Given below is the information of a manufacturing company to calculate the Non-Manufacturing Overhead
Factory supplies $1000
Salary of production manager $50000
Legal expense $10000
Freight-out$5000
Marketing samples $20000
Advertising $40000
Depreciation of factory building $4000
Administrative office rent $30000
Non-Manufacturing Overhead = Selling expenses + administrative expenses + general expenses
=($1000+ $5000+ $20000+ $40000) + ( $50000 + $30000) + ($10000+ $4000) = $160000

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