Manufacturing support costs definition
/What are Manufacturing Support Costs?
Manufacturing support costs are the overhead costs associated with the production process. These costs are relatively fixed, with no direct relationship to the volume of units produced. This means that manufacturing support costs should stay about the same even when production volumes change. These support costs can be substantial, sometimes exceeding the direct costs of the goods being produced.
Accounting for Manufacturing Support Costs
Manufacturing support costs are allocated to the number of units produced, and then charged to expense as these units are sold. This can mean that some support costs are initially capitalized into inventory, and then charged to expense at a later date. The allocation process typically involves the use of a standard allocation rate per unit, which may differ somewhat from the actual costs incurred in any given period.
Examples of Manufacturing Support Costs
Examples of manufacturing support costs are as follows:
Factory manager compensation
Quality assurance compensation
Materials handling compensation
Factory rent
Production-related insurance
Equipment depreciation
Production-related utilities
Supplies
Terms Similar to Manufacturing Support Costs
Manufacturing support costs are also known as factory overhead and factory burden.