Presupuestos

DEFINITION OF MANUFACTURING OVERHEAH COSTS
Indirect costs are considered as those costs, which do not have a clear identification with the specific activity or production units. Therefore, eventhough they are costs, which contribute to the company’s achievement of output, they cannot be directly allocated to these targets. As examples of direct costs, one might mention mechanical energy,heating, lighting, leases, etc.
An adequate cost analysis recommends that general indirect costs should be distinguished from the overhead costs affecting production, thus giving indirect production costs(overhead costs) as those related to the production cycle while the “general” indirect costs are the umbrella for cost factors attributable to the non manufacturing activities, such as: general andadministrative, marketing (or sales), research and development. Nonetheless, it is appropriate to point out that the inclusion of the latter costs in the calculation of the products pricing will dependon the system costing employed.
To be more specific in te conceptual delimitation of term, overhead costs might be defined as the cost of those factors contributing to the achievement of thecorresponding output, with the exception for this purpose of direct costs (raw material and labour). Some of the factors making up this category might include: fuels; spares; depreciation of machinerymaintenance; inspection; quality control; supplies, etc.
As for the current cost structures in companies, it is worth mentioning the substantial change they have undergone both in quantitative andqualitative terms, with a considerable increase in the indirect costs related to such activities as: production, sales, research, etc., with other factors traditionally considered significant becoming lessrelevant.
As a result of the increase in automation and mechanization affecting many of the productive processes, it s common to see a reduction in the direct labour cost and an increase in the costs...