What is Manufacturing Overhead

Manufacturing overhead is all the costs that a factory incurs, other than the variable costs needed to build products, including direct labor and direct materials.
Examples of costs which are included within the manufacturing overhead group are:
Property taxes on the production facility
Depreciation on equipment employed in the production procedure
Salaries of maintenance staff



  

Rent on the factory building

Salaries of the materials management personnel

Salaries of manufacturing managers

Supplies not directly related to products (such as manufacturing forms)

Salaries of the quality control personnel

Wages of building janitorial employees

Utilities for the factory

Applied Manufacturing Overhead

Applied manufacturing overhead refers to manufacturing overhead costs applied to units of a product throughout a specific period. It is calculated using a formula; in most cases, you multiply the total manufacturing costs or direct labor costs, including materials and worker pay, by the predetermined application or overhead rate.

You likely have the overhead rate established, however in case not, divide the total manufacturing overhead costs from the estimated total amount of direct labor costs, direct labor hours or machine hours.