Define non manufacturing overhead costs?

Open uri20170510 32134 7ezpi6?1494421819 jaggu asked almost 3 years ago

Hi, What are non manufacturing overhead costs?

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered over 2 years ago

Since these costs are outside of the manufacturing function, they are not considered to be costs of the products. As a result, the nonmanufacturing costs are not allocated to the products for determining the costs for inventory or for the cost of goods sold. Instead, the nonmanufacturing costs are immediately expensed in the accounting period in which they are incurred. That is why accountants say that the nonmanufacturing costs are period costs or period expenses.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

Since these costs are outside of the manufacturing function, they are not considered to be costs of the products. As a result, the nonmanufacturing costs are not allocated to the products for determining the costs for inventory or for the cost of goods sold. Instead, the nonmanufacturing costs are immediately expensed in the accounting period in which they are incurred. That is why accountants say that the nonmanufacturing costs are period costs or period expenses. (Only the manufacturing costs of direct materials, direct labor and manufacturing overhead are product costs.)

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Picsjoin 2017224123730582 Archana answered almost 3 years ago

Hie Jaggu, - We use the term "nonmanufacturing overhead costs" or "nonmanufacturing costs" to mean the Selling, General & Administrative (SG&A) expenses and Interest Expense. Under generally accepted accounting principles (GAAP), these expenses are not product costs. (Product costs only include direct material, direct labor, and manufacturing overhead.) - Nonmanufacturing costs are reported on a company's income statement as expenses in the accounting period in which they are incurred. Expressed another way, nonmanufacturing costs are not allocated to products via overhead rates since they are not included in the amounts reported as inventory on the balance sheet or in the cost of goods sold that is reported on the income statement. Even though nonmanufacturing overhead costs are not product costs according to GAAP, these expenses (along with product costs and profit) must be covered by the selling prices of a company's products. In other words, selling prices must be large enough to cover SG&A expenses, interest expense, manufacturing overhead, direct labor, direct materials, and profit. Some of the costs that would typically be included in nonmanufacturing costs include: 1. Salaries and fringe benefits of selling, general and administrative personnel. This would include the company president, vice 2. presidents, managers, and other employees in the nonmanufacturing functions of the company. 3. Rent, property taxes, utilities for the space used by the nonmanufacturing functions of the company. 4. Insurance for areas outside of the factory. 5. Interest on business loans. 6. Marketing and advertising. 7. Depreciation and maintenance of equipment and buildings outside of manufacturing. 8. Supplies for the offices.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered almost 3 years ago

Nonmanufacturing overhead costs are the business expenses that are outside of a company's manufacturing operations. These are often referred to as the selling, general and administrative (SG&A) expenses plus the company's interest expense. Examples of the nonmanufacturing overhead costs include the salaries and other expenses for the following business activities: selling, distribution, marketing, finance, IT, human resources, legal, and so on. Since these costs are outside of the manufacturing function, they are not considered to be costs of the products. As a result, the nonmanufacturing costs are not allocated to the products for determining the costs for inventory or for the cost of goods sold. Instead, the nonmanufacturing costs are immediately expensed in the accounting period in which they are incurred. That is why accountants say that the nonmanufacturing costs are period costs or period expenses. (Only the manufacturing costs of direct materials, direct labor and manufacturing overhead are product costs.) While the nonmanufacturing overhead costs are not allocated to the products, the company must have its selling prices and sales revenues sufficient to cover both the product costs and the period expenses in order to avoid a negative net income.

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