What is Manufacturing Overhead?



In every manufacturing enterprise there are three basic costs that must be immediately considered as an owner assigns a value to a product.  First, there are the direct material costs. This refers to the cost of the “raw materials” that an owner needs in order to produce his or her product. For instance, the cost of the wood is a direct material cost for a furniture manufacturer.  Second, there is direct labor cost. This term refers to the price of all the labor that is immediately involved in the production of a product. The final cost to consider is manufacturing overhead. Manufacturing overhead refers to the indirect factory-related costs that are incurred by a company as they make a finished product.

Manufacturing overhead includes costs like material handlers that aren’t involved in the production of the final goods. It further includes any employees who are involved in the set-up of equipment and its inspection. Finally, the maintenance and custodial staff of a company would be categorized under overhead, along with all managers and record keepers.

The health of any company depends upon understanding and tracking manufacturing costs. The best way to manage overhead cost is with the ERP software designed by SMe software.   The SMARTer Manager manufacturing management system is highly configurable, completely integrated business software for the small to mid-size manufacturer. Their software puts all the data from any business at one’s fingertips so an owner, manager, or financial officer can easily track all the key factors and costs of a company in real time. In other words, a company that uses this time-tested technology becomes more nimble and efficient and has immediate access to all ongoing data. A business that is always aware of its costs is a business that can cut costs. Contact SMe software today and give your manufacturing enterprise the edge over your competition today.