What are Indirect Manufacturing Costs?

Indirect manufacturing costs are production costs that cannot be directly associated with a produced unit. Under financial reporting, indirect manufacturing costs are aggregated into an overhead cost pool and allocated to the number of units produced in a reporting period; doing so results in some capitalization of these costs into the inventory asset.

Examples of Indirect Manufacturing Costs

Examples of indirect manufacturing costs are as follows:

Facility related. Includes the costs of equipment and facility depreciation, utilities, and repairs on the production equipment and factory building.
Compensation related. Includes the costs of the wages and fringe benefits of all manufacturing support staff, including supervisors, quality assurance personnel, and materials management staff.
Other indirect costs. Includes the costs of production supplies and outside support services.