The costs incurred in a production process as a result of which raw material is converted into finished goods. The conversion costs usually include direct labor and manufacturing overheads but exclude the costs of direct material itself.
The Cost of Goods Manufactured (COGM) represents the total production cost of finished goods transferred from a production facility to inventory over an accounting period.
An hour spent working on a product, service, or cost unit produced by an organization by those operators whose time can be directly traced to the production. Direct labour hours are sometimes used as a basis for absorbing manufacturing overheads to the cost unit in absorption costing.
Factory costs, also known as factory expenses, are expenditures incurred by the manufacturing section of an organization. This includes direct materials, direct labor, direct expenses, and manufacturing overheads. It excludes markup or profit.
The fixed overhead absorption rate is calculated by dividing the budgeted fixed overheads by the budgeted production units or other budgeted production measures, reflecting the allocation of fixed manufacturing overheads to individual units of production.
Personnel not directly engaged in the production of a product or cost unit manufactured by an organization. Examples of indirect labour include maintenance personnel, cleaning staff, and senior supervisors, such as foremen.
Machine Hour Rate is an absorption rate used in absorption costing, calculated to allocate overheads to products based on the hours machines are used in the manufacturing process.
Overhead costs are indirect expenses that are not directly tied to a specific product or service but are necessary for the overall operations of an organization.
