What is Fixed Manufacturing Overhead Incurred?

Fixed manufacturing overhead incurred is that component of factory overhead that does not vary with production volume. A business still incurs these costs, because they are necessary to the ongoing operation of the firm’s manufacturing operations.

Examples of Fixed Manufacturing Overhead Incurred

A good example of fixed manufacturing overhead incurred is the monthly depreciation expense of factory equipment. This cost remains consistent regardless of how many units are produced. For instance, if a manufacturing company uses a $1 million machine that depreciates at $5,000 per month, this expense does not change whether the factory produces 1,000 units or 10,000 units in that month.

Examples of other types of fixed manufacturing overhead incurred are rent, the salaries of production managers, and insurance for the production facility. Thus, a production facility might enter into a lengthy facility lease to house its production equipment, and must pay the landlord the monthly lease payment even if it conducts no production operations at all.